Club Troppo

The AIFS puts on a mean Annual Conference. They fussed over us speakers trying to make sure we weren’t just a bunch of talking heads. I would have liked to have attended more of it, but had another conference at which I had pontification duties at the same time.

In any event, I participated in two very well ‘curated’ (as we say these days) panels, one lasting two hours – yes, that’s right. My opening statement to this panel is above, and the whole thing, should you wish to check it out is below. It was a great panel. And below it is a forty minute panel I was on which discussed families, behavioural economics and nudges more generally. That was just me and Sam Hannah-Rankin who seems, at least from the outside, to be doing a good job of running her innovation unit in DPC.

I reproduce here a fine review of what seems like a fine book. I’m not buying the book because of the outrageous price the academic publishers are charging. It’s an interesting story of practical contribution – economics as clarified policy commonsense as I like to think of it. But, along with so much else, it’s been swept away by the new philistinism managerialism. Academics are hitting their KPIs, filling in their forms, but making original contributions to Australian policy problems? Not so much.

It reminds me of something Tom Fitzgerald said in his Boyer Lectures a long time ago:

What is inspiring . . . is the example of Australian economists who arrived at independent conclusions contrary to the world orthodoxy, who invited criticism from the most eminent upholders of that orthodoxy, and, on being rejected, put their argument in an international forum, to gain ultimately a large measure of acceptance for their initial heresy.  Today they are far better remembered and admired by an eminent American economist, the Nobel Prize winner Paul Samuelson, than by any Australian counterparts.  . . .  Professor Samuelson has recently referred to them as ‘my-down-under-heroes’

If this beautiful, elegiac book does not move you to be proud to be an Australian or New Zealand economist then I fear you may need a heart transplant. A delicious little morsel at just over 250 pages, Alex Millmow’s A History of Australasian Economic Thought still manages to convey a distinct sense of what was a diverse but definably unique branch of economic thought in Australia and New Zealand. I commend Professor Millmow for this volume and recommend it highly.

The general problem with the history of economic thought, it seems to me (I am not a historian of economic thought), is the same as with all academic history. So involved in rooting out details of specific episodes and figures, it can be intimidating and apparently unnavigable for the generalist. Millmow’s book is a splendid corrective for this problem as regards the history of economic thought in Australia and New Zealand. It touches lightly on the various episodes in this history but with sufficient depth to give the reader a real appreciation for it, and sufficient orientation to it and the body of literature around it for the reader to seek deeper knowledge if they wish. Continue reading →

Cross posted from Inside Story

In 1943, back working where he’d been during the first world war, the now-famous economist John Maynard Keynes wrote to a friend:

Here I am back… in the Treasury like a recurring decimal — but with one great difference. In 1918 most people’s only idea was to get back to pre-1914. No one today feels like that about 1939. That will make an enormous difference when we get down to it.

And so it did.

And here we are like Keynes’s contemporaries in 1918. Keen to return to the set-up we know got us into this mess. In the midst of the financial services royal commission, scandals stretch as far as the eye can see. They are rife in finance, of course, but are also evident in the way professionals — from the commanding heights of academia to policy-makers and opinion leaders — have failed to move beyond a vision of reform that was already stale at its zenith in the 1980s and 90s. After the global financial crisis, that vision stands today bereft and becalmed, increasingly irrelevant in today’s financialised, professionalised, digitised world.

Trauma, intellectual growth and reform

The postwar reforms were profound, giving us a generation of unmatched prosperity. But there’s also a more recent time when we turned our back on the bad old days. In response to the recessions of 1975 and 1982, and after prime minister Malcolm Fraser’s feints towards economic liberalisation, the Hawke and Keating governments turned “economic rationalism” — as it was then called — into a comprehensive program to refurbish our economic institutions.

In each case reform was built on new understandings that had originated in the academy. Where the Keynesian revolution had underpinned postwar reform, post-1960s reform was founded on a cluster of ideas. They included George Stigler’s critique of “regulatory capture,” Milton Friedman’s popularising of proposals for unbundling of delivery from the financing of government services (using vouchers and income-contingent loans, for instance), and Ronald Coase’s idea of reassigning property rights to achieve specific objectives (think pollution permits and spectrum auctions).

All these men were University of Chicago economists favouring greater reliance on markets. But they thought of these ideas as technocratic rather than ideological. Many of them — like income-contingent student loans and the liberalisation of airlines, tariffs and agricultural subsidies — had egalitarian implications and were supported by many from the centre left to the centre right.

The institutional refurbishment following the second world war lasted twenty-five-odd years. But it was only a few years before the Hawke-era reforms atrophied into a reductive formula under which change that looked more rather than less “market-based” was preferred on principle. This might reflect the lobbying power of business even with centre-left governments. But it was also the product of faltering intellectual progress in the academy and the political class’s wider failure of imagination and empathy for the people for whom they ostensibly govern. Continue reading →