Economists were generally in favour of the UK remaining in the EU and highly critical of the policy proposals of Donald Trump. And yet the UK voted to leave the EU and Donald Trump was elected.
People rejected the advice of most economists. Many blamed the failure of most economists to predict the 2007/8 financial crisis and to find solutions to the growing gulf between rich and poor, with the majority stuck on low incomes.
So to what extent are economists to blame for the rise in populism – a wave that could lead to electoral upsets in various European countries? The podcast below brings together economists and politicians from across the political spectrum. It is over an hour long and provides an in-depth discussion of many of the issues and the extent to which economists can provide answers.
Should economists share the blame for populism? Guardian Politics Weekly podcast, Heather Stewart, joined by Andrew Lilico, Ann Pettifor, Jonathan Portes, Rachel Reeves and Vince Cable (23/2/17)
- Why has globalisation become a dirty word?
- Assess the arguments for and against an open policy towards immigration?
- In what positive ways may economists contribute to populism?
- Do economists concentrate too much on growth in GDP rather than on its distribution?
- Give some examples of ways in which various popular interpretations of economic phenomena may confuse correlation with causality.
- Why did the proportions of people who voted for and against Brexit differ considerably from one part of the country to another, from one age group to another and from one social group to another?
- In what ways have economists and the subject of economics contributed towards a growth in human welfare?
- What are the advantages and disadvantages of the trend for undergraduate economics curricula to become more mathematical (at least until relatively recently)?
The town of Kilkenny in Ireland has just hosted the sixth annual Kilkenomics festival (Nov 5–8) where economics and comedy meet. The festival brought together comedians and economists to take a look at some of the most pressing economic and social issues, such as the refugee crisis, economic recovery, banking and finance, the growth in inequality, the future of the EU, economic power, the environment and personal behaviour.
With stand-up comedians taking a sideways look at economic issues and top economists having their ideas lampooned, or lampooning them themselves, the festival provided a fun, but useful, reality check for the discipline of economics.
The festival attracted some major names in the field of comedy, economics, journalism and politics. Perhaps the biggest draw was the former finance minister of Greece, Yanis Varoufakis (see also), who opened the festival with a withering attack on the economic model being pursued by Greece’s creditors (the European Commission, the IMF and the ECB).
Much of the comedy was really aimed, not so much at economics and economists, but more at how politicians pursue economic policies and interpret economic models in ways that suit their own political agenda. But still there was no escape for economists. Much of the humour was directed at unrealistic assumptions and unrealistic visions of how economies function.
Thanks to JokEc for the following:
||Economics is the only field in which two people can get a Nobel Prize for saying exactly the opposite thing.
||If you rearrange the letters in “ECONOMICS”, you get “COMIC NOSE”.
||Economics has got so rigorous we’ve all got rigor mortis.
||How many economists does it take to change a light bulb?
I’ll leave you to work out the best answer to that last one – there could be many depending on the school of thought.
Videos and podcasts
Kilkenomics Promo – 2015 Kilkenomics on YouTube (23/10/15)
Kilkenomics: Highlights 1 Kilkenomics on YouTube (27/10/15)
Kilkenomics: Highlights 2 Kilkenomics on YouTube (30/10/15)
Kilkenomics 2014 BBC ‘In the Balance’ (9/11/14)
Kilkenomics launches biggest programme to date Meath Chronicle (1/10/15)
The subversive wonders of Kilkenomics – where economics meets stand-up The Spectator, Liam Halligan (15/11/14)
Guilty as charged: Irish standup festival puts economics in the dock The Guardian, Larry Elliott (8/11/15)
Ireland no paradigm of successful austerity – Varoufakis The Irish Times, Eoin Burke Kennedy (5/11/15)
Economy of sex … how much are your orgasms costing you? Irish Independent, Niamh Horan (8/11/15)
- What is it about economics that gives so much material to comedians?
- ‘The worse it gets the funnier it seems because comedy exists with tragedy.’ To what extent is this true of economics as a discipline or simply of the state of the world economists are studying at any one time?
- Should assumptions in economics always be realistic? Explain why or why not.
- For what types of reason might economists disagree?
- Make up an economics joke and test it on your fellow students. Perhaps there ought to be a vote for the funniest and a prize for the winner. What was it about the winning joke that made it the funniest?
Economic journalists, commentators and politicians have been examining the possible economic effects of a Yes vote in the Scottish independence referendum on 18 September. For an economist, there are two main categories of difficulty in examining the consequences. The first is the positive question of what precisely will be the consequences. The second is the normative question of whether the likely effects will be desirable or undesirable and how much so.
The first question is largely one of ‘known unknowns’. This rather strange term was used in 2002 by Donald Rumsfeld, US Secretary of Defense, in the context of intelligence about Iraq. The problem is a general one about forecasting the future. We may know the types of thing that are likely happen, but the magnitude of the outcome cannot be precisely known because there are so many unknowable things that can influence it.
Here are some known issues of Scottish independence, but with unknown consequences (at least in precisely quantifiable terms). The list is certainly not exhaustive and you could probably add more questions yourself to the list.
||Will independence result in lower or higher economic growth in the short and long term?
||Will there be a currency union, with Scotland and the rest of the UK sharing the pound and a central bank? Or will Scotland merely use the pound outside a currency union? Would it prefer to have its own currency or join the euro over the longer term?
||What will happen to the sterling exchange rate with the dollar, the euro and various other countries?
||How will businesses react? Will independence encourage greater inward investment in Scotland or will there be a net capital outflow? And either way, what will be the magnitude of the effect?
||How will assets, such as oil, be shared between Scotland and the rest of the UK? And how will national debt be apportioned?
||How big will the transition costs be of moving to an independent Scotland?
||How will independence impact on Scottish trade (a) with countries outside the UK and (b) with the rest of the UK?
||What will happen about Scotland’s membership of the EU? Will other EU countries, such as Spain (because of its concerns about independence movements in Catalonia and the Basque country), attempt to block Scotland remaining in or rejoining the EU?
||What will happen to tax rates in Scotland, with the new Scottish government free to set its own tax rates?
||What will be the consequences for Scottish pensions and the Scottish pensions industry?
||What will happen to the distribution of income in Scotland? How might Scottish governments behave in terms of income redistribution and what will be its consequences on output and growth?
Of course, just because the effects cannot be known with certainty, attempts are constantly being made to quantify the outcomes in the light of the best information available at the time. These are refined as circumstances change and newer data become available.
But forecasts also depend on the assumptions made about the post-referendum decisions of politicians in Scotland, the rest of the UK and in major trading partner countries. It also depends on assumptions about the reactions of businesses. Not surprisingly, both sides of the debate make assumptions favourable to their own case.
Then there is the second category of question. Even if you could quantify the effects, just how desirable would they be? The issue here is one of the weightings given to the various costs and benefits. How would you weight distributional consequences, given that some people will gain or lose more than others? What social discount rate would you apply to future costs and benefits?
Then there are the normative and largely unquantifiable costs and benefits. How would you assess the desirability of political consequences, such as greater independence in decision-making or the break-up of a union dating back over 300 years? But these questions about nationhood are crucial issues for many of the voters.
Scottish Independence would have Broad Impact on UK Economy NBC News, Catherine Boyle (9/9/14)
Scottish independence: the economic implications The Guardian, Angela Monaghan (7/9/14)
Scottish vote: Experts warn of potential economic impact BBC News, Matthew Wall (9/9/14)
The economics of Scottish independence: A messy divorce The Economist (21/2/14)
Dispute over economic impact of Scottish independence Financial Times, Mure Dickie, Jonathan Guthrie and John Aglionby (28/5/14)
10 economic benefits for a wealthier independent Scotland Michael Gray (6/3/14)
Scottish independence, UK dependency New Economics Foundation (NEF), James Meadway (4/9/14)
Scottish Jobs and the World Economy Scottish Economy Watch, Brian Ashcroft (25/8/14)
Scottish yes vote: what happens to the pound in your pocket? Channel 4 News (9/9/14)
What price Scottish independence? BBC News, Robert Peston (12/9/14)
What price Scottish independence? BBC News, Robert Peston (7/9/14)
Economists can’t tell Scots how to vote BBC News, Robert Peston (16/9/14)
Books and Reports
The Economic Consequences of Scottish Independence Scottish Economic Society and Helmut Schmidt Universität, David Bell, David Eiser and Klaus B Beckmann (eds) (August 2014)
The potential implications of independence for businesses in Scotland Oxford Economics, Weir (April 2014)
- What is a currency union? What implications would there be for Scotland being in a currency union with the rest of the UK?
- If you could measure the effects of independence over the next ten years, would you treat £1m of benefits or costs occurring in ten years’ time the same as £1m of benefits and costs occurring next year? Explain.
- Is it inevitable that events occurring in the future will at best be known unknowns?
- If you make a statement that something will occur in the future and you turn out to be wrong, was your statement a positive one or a normative one?
- What would be the likely effects of Scottish independence on the current account of the balance of payments (a) for Scotland; (b) for the rest if the UK?
- How does inequality in Scotland compare with that in the rest of the UK and in other countries? Why might Scottish independence lead to a reduction in inequality? (See the chapter on inequality in the book above edited by David Bell, David Eiser and Klaus B Beckmann.)
- One of the problems in assessing the arguments for a Yes vote is uncertainty over what would happen if there was a majority voting No. What might happen in terms of further devolution in the case of a No vote?
- Why is there uncertainty over the amount of national debt that would exist in Scotland if it became independent?
Here’s a question that goes to the heart of economics and the social sciences generally: how desirable is the market system?
Our lives are dominated by markets. Whether in working or consuming, we operate in a market economy in which money is exchanged for goods or services. But also financial and product markets determine much of the structure of society, where most things seem to have a price.
But whilst, as a positive statement, we can say that money and markets are all around us, does that make them desirable? Markets provide signals and incentives; but are the signals the right ones? What are the incentives and how do we respond to them? And are these responses optimal?
You will probably have studied various ways in which markets fail to provide the optimal allocation of resources. But what are the limits of markets as a mechanism for social choices? And is there some more fundamental issue about the morality of a society that is organised around markets?
These are questions considered in the following podcast. It is an episode from BBC Radio 4’s Start the Week programme, hosted by Andrew Marr, with guests Michael Sandel, Diane Coyle and Grigory Yavlinksy. Here are the programme details:
Andrew Marr discusses the relationship between markets and morals with the political philosopher Michael Sandel. In his latest book, What Money Can’t Buy, Sandel questions the dominance of the financial markets in our daily lives, in which everything has a price. But the economist Diane Coyle stands up for her much maligned profession, and points to the many benefits of a market economy. The Russian economist Grigory Yavlinksy argues against viewing the world of money as separate from culture and society: he believes the financial crisis was merely a symptom of a wider moral collapse, and that it is time to examine the way we live.
(Links to the three contributors: Michael Sandel, Diane Coyle (see also), Grigory Yavlinsky.)
Michael Sandel on Money and Morality BBC Start the Week programme (21/5/12)
Videos and articles
For a range of videos and articles on the morality of capitalism, see the previous post at:
We need to talk about Capitalism (28/1/12)
- What crises are there in current capitalism?
- What, according to Michael Sandel, is the difference between a market economy and a market society?
- Is the market society a relatively new phenomenon, or does it go back hundreds of years?
- To what extent is the greed expressed through markets and encouraged by markets affecting/infecting society and human relationships generally?
- What is the role of morality and trust in determining the desirability of market relationships?
- To what extent does a market economy allow people, rich and poor, to live separately from each other and not interact as joint members of society?
- What are the value systems promoted by marketisation? Should certain aspects of human life be outside these value systems?
- To what extent is the crisis of capitalism a crisis of economics?
- What policy alternatives are there for rebalancing society?
- What is the role of economists in advising on policy alternatives?
Economic assessment of real-world issues relies heavily on data. It is the same with economic policy recommendations. Both public- and private-sector organisations gather data, which are then used for analysis, often presented in a report. These reports are then often used as the basis for policy, whether by the government, local authorities or the private sector. Sometimes the data are those collected by national statistical agencies, such as the Office for National Statistics (ONS) in the UK; sometimes they are collected by private agencies; sometimes by individual researchers.
Clearly the analysis and the suitability of any policy recommendations depend on the quality of the data. But how much can we rely on the data? A problem is that people have an interest in gathering and/or selecting data that support their opinions. As a result, the data used for analysis and policy recommendations may be unreliable and incomplete.
This is not to say that the data collected by reputable agencies such as the ONS are wrong. Rather, it is the selective use of them that can be highly misleading. Sometimes, however, the data that some agencies produce may indeed be unreliable, with too small or unrepresentative samples. If they rely on surveys, the survey questions may be poorly framed or lead the respondent into giving a particular answer.
Newspapers make use of data and reports all the time to make a particular case – a case in line with the newspaper’s political stance. The lesson for economic students is that we need to be alert all the time as to just how reliable data are; and to whether the conclusions drawn from them are correct.
The following two articles by Ben Goldacre, from the Guardian’s Bad Science series, look at the misuse of data. The first looks at the case of the Health Service; the second at the possibility of savings by local government in their procurement activities.
How far should we trust health reporting? Guardian, Ben Goldacre (17/6/11)
Misleading money-saving claims help no one Guardian, Ben Goldacre (24/6/11)
Realising Savings through Procurement Optimisation Opera Solutions
- According to the first article above, how much newspaper reporting based on the use of data is unreliable?
- What are the reasons for the unreliability of newspaper reporting?
- For what reasons might the ONS and other reputable agencies periodically have to amend time series data?
- “Council incompetence ‘costs every household £452 a year'”. Critically examine this claim by the Daily Mail.
- Why may Opera Solutions be seen as not wholly independent in reporting the possibilities of cost savings by local government?
- In the absence of reliable data, can any economic policy conclusions be drawn from economic models? Explain.