What is an economist

Do economists need to learn some humility?

Ok, unpopular rant Thursday!

I’ve been loving the self-reflection from public sector economists about the role of economics in Australia over the last few weeks. From Andrew Hauser’s speech to Steven Kennedy’s reflections on evidence to Danielle Wood’s Ted Evan’s lecture I have enjoyed the discussion.

I mean, Wood’s quote here is fundamentally and completely correct:

"The role of economists in these debates is not to offer a reflexive 'no', but it is to ensure that there is rigour in the discussion of costs, benefits and trade-offs of any intervention"

Fundamentally, economics provides tools for describing and measuring trade-offs, while the role of the economist is to utilise those tools to inform not to provide recommendations or persuade individuals to take a point of view. This is a view I agree with, and have held forever as shown by the links on my former blog.

If this is the case, then why has another top Australian economist (Steven Hamilton) shown so much concern with the framing?

Economists face incentives

I have some experience with the public sector, and the nature of the public sector fosters a lot of risk aversion and general wrongness aversion. In that world, a claim to humilty doesn’t necessarily just refer to accepting that things are uncertain - but potentially not updating beliefs based on evidence where those beliefs are initially set by the prejudice and feelings of those in a ministers office.

Take the inflation debate in 2023, and the way the Treasury and Steven himself was willing to say that subsides would reduce inflationary pressure. This was not taking a position of humility and uncertainty, but instead using uncertainty as a way to undermine a consideration based on evidence and economic knowledge to make claims that were expedient for the role.

Let me tell you what an economist needs to be in my mind. They need the humility to constantly critique their own knowledge and understanding, and allow their views to change with evidence. They need the arrogance to state what the evidence means firmly and clearly, and demand that such standards are applied equally irrespective of who makes the argument. And they require the internal calm to surrender the policy issue once information has been shared, to allow society as a whole to share values and determine the path they want to take.

This doesn’t describe any human in existence - someone with focused humility is going to struggle to firmly articulate trade-offs. Someone with arrogance is going to struggle to see where the evidence is weak and condition statements appropriately. And someone who cares enough to think about this won’t be able to let go of the issue.

As I’ve gotten older, I’ve realised that Keynes description of an economist isn’t something to aspire too - but an example of how arrogant we sometimes are as economists about our own knowledge and abilites.

In this world, all of us have a responsibility to “be economists” - to understand the trade-offs and the policy issues that we are passionate about. Let’s return to Robinson again:

“The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.”

Now we all have lives, so we can’t be expected to dedicate ourselves deeply to the study of economics - that is why some people specialise in these topics. For this reason, it is more important than ever that those who specialise on developing knowledge work with those who can communicate it - accurately - to share this with the public.

As Wood says, this involves trust - but the purpose is not to build trust to persuade, it is to fundamentally be honest and then hopefully earn that trust.

But here is the unpopular bit. This isn’t just one way - if you care about economic issues you have a responsibility to think about them, and think about the broad social outcomes that occur. If you would rather rely on prejudice and “common sense” then poor public debate and policy outcomes are partially your fault - not some arbitrary elite you are trying to blame to dodge responsibility.

The victim mentality of those who always blame others for their life not being like their favourite instagram page is what leads to outcomes like Brexit - and pretending that this has anything to do with “uncertainty” or “overconfidence” by economists is pandering to a set of people who need to grow up.

My view is that economists (especially myself included) are overrated for policy debates - but economics as an organising framework is wildly underrated. All of us have a responsibility to challenge our views on how the world works and think critically, and economics is a framework that helps us all do this.

Note: Although to defend a lot of my economist friends - when they are doing the science+engineering parts of using data and theory, they do amazing things, and it is very worth considering the evidence they provide on the topics they work on. But there is a reason why the policy suggestions of Nobel Prize winning economists are more often than not complete nonsense …