Tuesday, 3 March 2009

The quality of economic journalism (updated x2)

I'm a little late on this issue but I see from reading TVHE that Steve Pierson over at the Labour Party blog, The Standard, is criticising National's stimulus package, and the quality of economic journalism. I was somewhat surprised that Pierson was criticising other people's economic understand, but be that as it may, I want to add a couple of short comments to what Matt Nolan has already said.

Matt writes
I’ll go through the two harshest criticisms below:
1) “In the greatest economic crisis in a lifetime, we remain the only country in the world whose government has done nothing to try to stimulate the economy”
I’m not so sure about this. Just recently there was a post on Dani Rodrik’s blog that, when talking about the G20, stated:
There have been a relatively small number of stimulus packages thus far and they don’t amount to much
We hear alot about stimulus packages around the world - and I’m not sure that NZ’s tax cuts and infrastructure spending are that small in comparison …
My point here is that Pierson looks like he is all fired up over having a stimulus package without asking, Do we need one and if so, what form should it take? These are two questions over which there is much debate, many economists argue that a package is not needed or will do more harm than good and many of those who support a package, disagree over what should be in it. The issue is that the usefulness of a stimulus package is far from agreed upon by economists and it should not be taken for granted. So to say
“... we remain the only country in the world whose government has done nothing to try to stimulate the economy”
even if true, could turnout to be a good thing.

Matt Nolan continues
2) “Many (economic journalists) are so economically illiterate that they think running an economy is like running a household budget”
I’m not sure this is really economically illiterate - expect for the bit about “running the economy”. The government doesn’t so much run the economy - it is a sector in the economy, a sector that is focused on redistributing and setting up a broad framework to improve outcomes in the market economy.
I agree with Matt, but would say the government is a 'too large' a sector of the economy. But the household analogy is a good one, in particular because it focuses our attention on the budget constraint. The government does have a budget constraint, just like a household, a point overlooked at our pearl.

It should be noted that the term economics comes from the Ancient Greek οἰκονομία (oikonomia, "management of a household, administration") from οἶκος (oikos, "house") + νόμος (nomos, "custom" or "law"), hence "rules of the house(hold)".

Update:
Not PC comments here.

Update 2: Matt Nolan has some additional comments here.

9 comments:

matt b said...

Paul, your post's implied premise is that Steve Pierson writes these things because he thinks what he writes is correct or matters. I suspect he writes this stuff because, regardless of its truth, it looks just plausible enough to embarrass the National Party!

Paul Walker said...

Fair point Matt. I fear you may be right :-(

djp said...

interesting point matt, they don't often want to stick around and discuss the merits of their posts... kinda fire and forget

Clinton Smith said...

Paul. I fail to see how you can argue we're a Labour Party blog when half the writers publicly stated they would vote Green, including me.

Also, all the major economies are putting in place stimulus packages - US, EU, Japan, China, Australia, pretty sure I've seen stuff about what India is doing too.

If you think that macroeconomics is the same as microeconomics because of where the word economics comes from, you've got a long way to come.

djp. you know that of all the blogs, on The Standard you get replies from the authors most frequently.

Paul Walker said...

"Also, all the major economies are putting in place stimulus packages - US, EU, Japan, China, Australia, pretty sure I've seen stuff about what India is doing too."

Let assume this to be true, it doesn't address my point. What I said was "Do we need one and if so, what form should it take? These are two questions over which there is much debate, many economists argue that a package is not needed or will do more harm than good and many of those who support a package, disagree over what should be in it. The issue is that the usefulness of a stimulus package is far from agreed upon by economists and it should not be taken for granted." No matter how many governments have "stimulus packages" it simply is not true that there is not debate over whether or not these packages are a good idea.

"If you think that macroeconomics is the same as microeconomics because of where the word economics comes from, you've got a long way to come."

What????? I have never said that macro and micro are the same; for any reason. That they are different doesn't mean that the use of an analogy isn't helpful.

djp said...

fair point Clinton, it could be that I comment there the most however :)

bobux said...

Clinton

I fail to see how you can argue we're a Labour Party blog when half the writers publicly stated they would vote Green, including me.

I don't follow the Standard very closely, but have never noticed an instance where Labour has been criticised, or National supported, even on issues that seem unrelated to a left-right divide. Nor is the pervading tone one of concern for Green issues. Its more like 1001 variations on 'National Bad, National Bad, National Bad...'

Which is why I don't bother going there often.

Matt Nolan said...

"If you think that macroeconomics is the same as microeconomics because of where the word economics comes from, you've got a long way to come."

Methodologically macroeconomics should simply be applied microeconomics. Microeconomics is the general discipline, and macroeconomics is a specific application (and set of value judgments) that can be used for policy.

Trying to do macro without an understanding of micro is like trying to fix a machine without knowing how it works - hence why so many "non-economists" (I hate that term) get lost.

harris said...

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