Winner of the New Statesman SPERI Prize in Political Economy 2016


Saturday, 9 July 2016

Opportunity costs

I wrote this about a month ago, but decided not to post it because it sounded a bit like a personal rant. Following the Brexit result, and more introspection among economists about what more they could have done, I think this basic point is worth making

When I complain about the media ignoring economic ideas or economics generally, I’m told that economists - and academics more generally - must learn about PR. Indeed it may be my moral responsibility to do so. When I wrote about how other social scientists made useful criticisms of economics, but were often ignored because it was couched in language economists did not understand, I was told that economists should learn that language. And when I said in my post on Mirowski that he knew more about the history of economics and neoliberalism than I did, Lars Syll says I should educate myself. Note that in none of these cases am I saying there should be no engagement from economists: all three examples come from cases where I did attempt to engage.

In economics we do not just learn about opportunity cost, we also know about comparative advantage and the division of labour. It makes sense to set up systems (in production, trade, research or other things) where people do what they are good at, rather than just do a bit of everything. In academia people specialise for good reasons. To understand the macroeconomy better it really is sensible that I spend most of my time reading macroeconomic research rather than doing PR, reading sociology or the history of economic thought. Note I said most, not all.

That does not mean that we all become isolated in our own little worlds of knowledge. Indeed I think both good research and good application often benefits from some breadth of knowledge. But I think it beholds those of us with some knowledge to try and communicate it in terms that are easy for outsiders to understand, and avoid them having to read our literature. That is why I try to avoid jargon in my blogs unless I only want to communicate with other economists. If policymakers want macroeconomic advice I do not tell them to go read some article or change their policies before I’ll talk to them - I just give them advice.

To some it seems terribly arrogant if you say I do not have time to read a new literature, or cultivate relationships with journalists, particularly if you work in that literature or you are a journalist. To see why it is not arrogant just turn it around: how would that person feel if I said you had to start reading a lot of macroeconomics literature. I never say that, but write blogs instead, and put a considerable effort into doing so. To be told that in addition I have to learn the arts of PR as well as reading other literatures is not only annoying, it makes no economic sense.


24 comments:

  1. You make a good point. But this raises the old question about the role of the media. I think of my job at the IC as being to communicate economic ideas to laymen; my comparative advantage lies in explanation rather than original research. However, I suspect I and the IC are unusual. Why is this? Could it be that our audience is more receptive? (Telling people that economics can make them richer is easier than telling them that their deeply-held views on, say, immigration are wrong?) Or could it be that there are structural barriers to such communication - such as the BBC's fetish of false balance, or the recruitment of journalists from laymen rather than specialist disciplines? Etc

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  2. I have just being going back over the Iraq war vote of March 2003, which Cameron, Osborne, May, and Johnson all supported (as did the overwhelming majority of Tories in Parliament).

    The Sun and the Daily Mail also supported the war.

    Then, for the sake of power without responsibility, they blamed the government for not equipping the troops properly and forgot about their 2003 role.

    Now the Iraq war, as seen from these 2016 Tories and the Murdoch-Rothermere press, Blair was responsible for it all.

    My Labour MP did not vote for the war, in a constituency which would have been I'd guess three-quarters in support of the conflict in 2003 and the same percentage against it in 2016.

    My region was also amongst the top 20 Leave regions.

    If it goes wrong on the economy, its hard to see who the Murdoch-Rothermere press can deflect attention to this time, as they were in joint charge of the referendum's informational quartermaster's store.

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  3. If I understand what you're saying I think you are wrong.
    I spent a long time as an economic journalist. To do that job properly I had to read lots of macroecomic literature. Unfortunately lots of journalists don't.
    If you want to find out how to convert macroeconomic insights into making money, you have to study making money. If you want to convert macroeconomic insights into the,Es that influence public discourse, you have to learn PR.
    Newspapers on the whole are owned and run by people with a very different view of the world from yours (or mine.) They can fill their ever-decreasing number of pages with lots of stuff which their owners like.
    It may be the case that by only focusing on your area of comparative advantage you maximise your understanding of macroeconomics. It may be that this means you are secon to a man who lives in the hills of Andalusia with no telephone. What good is he doing?

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  4. Professor Alice Roberts is doing a wonderful job explaining scientific ideas to the general public. Crucially it is her job to do this, she is Professor of Public Engagement in Science. Maybe we need a few more of these roles. Professor of Public Engagement in Economics and the Social Sciences? There needs to be some response to the failure of the mainstream media to report objectively.

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  5. "In economics we do not just learn about opportunity cost, we also know about comparative advantage and the division of labour."

    Funny you should mention that. The principle of Comparative Advantage requires all the individuals in a geographic area to be essentially the same sort of generalist, and that conflicts directly with Adam Smith's observation that the division of labour and specialisation is the key to success. Which I find bizarre. Explain?

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  6. Quite so, Simon.

    I read your blog precisely I seek a refuge from PR i.e. the flannel & misinformation of mediamacro.

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  7. Quite agree with your sentiments.

    I read your blog to counteract the pernicious, subliminal influence of pervasive PR i.e. the flannel and misinformation of media macro.

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  8. I agree with you. And as an artist who mainly studies anatomy, I want to say I enjoy your posts and find them enlightening. Well one or two go over my head I must admit.
    Economists need to be wary of PR. Your knowledge is too valuable and important to be twisted to make a good story.
    The role of PR in science can seriously distort facts. I often read newspaper headlines about some scientific discovery and later find that the original paper shows different results than those suggested by the press release which distorted the scientific findings to make a good headline.

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  9. Having followed your blog for some time, I feel the content is quite accessible and has a lot to offer non-economists. I tend to want to share (and do share) many of your posts...

    However, my main critism is how the facebook preview always appears as the spam comments caveat. Perhaps tweaking that and adding a short synopsis instead will increase the reach of your blog?

    Regards, Malcolm

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  10. Hi Professor. I love reading your blogs and appreciate the insights you bring and how (compared to Nick Rowe's writings which I have stopped reading as he seems to be addressing other economists) I can understand them. Most importantly, your writing (and those of other econ bloggers) made me realise that a lot of claims that some economists make (eg against helicopter money, in support of austerity) are open to challenge.

    Having said that, I do think economists could do more to "listen to the Gentiles" (per Krugman). I often feel that many lay people have legitimate views but fail to express them in terms that make sense to economists. It is easy for a trained economist to attack a lay argument. A better economist would try to see the world from that person's perspective and see if the lay person has a point that could be expressed more clearly and coherently.

    Also, there is what psychologist Stephen Pinker calls the "curse of knowledge", what Daniel Kahneman calls "What you see is all there is" or simply "parochialism". It is easy for a person to assume that what they know is all there is. It is a psychological bias that takes effort to overcome. So trying to learn something about politics, about PR, about journalists, etc. is worth doing. (Personally, perhaps betraying my own. Issues, I doubt there is much to learn from PR other than how to manipulate public opinion.)

    Having said that, I don't think you suffer from parochialism. You seem to be curious about the world and have certainly tried to communicate your ideas to a lay audience, which I appreciate.

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  11. On Brexit, while difficult to rationalise in economics, could make more sense through Amartya Sen's perspective of "development as freedom". Our well being is not only a function of our income, we also want to be free. The Brexiterrs feel that EU laws are making them "unfree", and would like the British Parliament to once again have the final say on what laws apply in Britaiin. I suspect in the end Britain will continue to implement EU laws almost 100%. But only if ratified by the British Parliament. While ratification might not seem a big deal, the possibility of not ratifying does contribute to a sense of freedom that would otherwise be absent.

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    1. I suspect in the end Britain will continue to implement EU laws almost 100%. But only if ratified by the British Parliament. While ratification might not seem a big deal, the possibility of not ratifying does contribute to a sense of freedom that would otherwise be absent.

      Maybe you're right. But it's ironic that the great majority of 'European' laws work in precisely this way. The EU passes a Directive and each Member State Government then has to prepare a law implementing the Directive for the Parliament to pass. This means that the detail of how the law is applied will be different in each country, but the general principles will be the same across the Union.

      Boring detail, I know, but perhaps not unimportant if your belief is widely shared.

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  12. You know, this is one of those "caught between a rock & a hard place" moments. Sure, social scientists (not just economists) need to engage with the public--and in my experience, many try, in their own ways. Sure, some of the jargon (and math as jargon too often) is intellectually useless, but some is necessary for communicating new ideas to each other in our academic fields. We need to learn to keep the ideas behind the jargon but communicate them clearly.

    However...journalists have not been doing their jobs anywhere. Either it is propaganda (i.e. Fox News or anything Murdoch, Russia Today, etc.) or it is dumbed down for ratings purposes (the dreaded "USA Today effect"). Journalists need to stop pandering. But to do so, those running the corporations need to have a little integrity. One would think the BBC is in a great position here, but alas, they too have failed.

    But finally, there is the public. Increasingly, we have publics everywhere that are not only badly educated--they like it that way. For some it's due to a feeling of powerless since the new attack of the elites beginning in the 1970s (cf. Bill Domhoff's work). Why bother if your voice and vote are ultimately meaningless? For too many others, however, there is this sense of pride in identity over intellect and integrity. If a critical mass of the public actually gave a damn, I suspect the journalists and their bosses would, too--and then you'd have your opening.

    So sure, academics deserve some blame here--but there are others who shoulder much more blame for the horrid state of discourse.

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  13. Spot on! Keep blogging - I find it incredibly useful.

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  14. I was bitterly disappointed by the Brexit vote, but like Simon Jenkins, I also think there may be some silver lining: at last the establishment might start taking some of the concerns (real or misguided) expressed outside of London seriously - where most people generally express such apathy that they do not even bother voting. If there was one good outcome, their voice was certainly heard. And maybe the fallout in the establishment will be good, although I think we are entering potentially dangerous times:

    https://www.theguardian.com/commentisfree/2016/jul/06/brexit-britain-property-bubble

    I for one appreciate your efforts to reach out to people in other disciplines - you have certainly gone a lot further than a Sargent or a Prescott. (Although Lars Syll is doing an important job.) I guess the point about comparative advantage, opportunity cost and division of labour is that these things are all fine in theory. In practice, however, it is not always the way things work. Import substitution policies for example have worked in as many countries as they have failed. The kind of questions economists don't ask is why. It seems that unless things are expressed in the form of the standardised model they simply ignore it. So it is often left to historians, psychologists and others to do this work. What ignores economists is that they do not use the standard (neo-classical) model, or in many cases, do not use any model. But what many economists don't want to understand, this includes Krugman, let alone Sargent, is that they have very good reasons for not wanting to do so. So unless this impasse is resolved we are not going to resolve the overall problem, and I think the world is worse off for it.

    There are a lot of obstructions to good multidisciplinary work (which there is a very strong case for - conventional economic theory ie the division of labour tells us that!). ANd that is the journal system and things like the REF. If you want to get into the AER you need a model - preferably their model. And that is going to rule out a lot of good work, understanding and hard earned knowledge, often from those being engaged in real field work, working under the umbrella of the humanities and other social sciences. Likewise if you take in a neo-classical model or a Krugman style gadget to them, you are likely to be laughed out of the room.

    But I think we are all worse off for this.

    On the EU vote. This may not turn out to be a disaster (providing the EU itself holds together and the Tories do not completely torch EU labour, environmental and human rights protections). But it was a massive opportunity cost.

    NK.

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  15. Poor communication can be blamed on the speaker/writer - in which case they are told to strengthen their communication skills, or one can look within oneself and perceive that one is not willing to listen. Not being able to listen is more often the culprit to poor communication. We cannot listen as some deeply held security is threatened by what is proposed, in which case it is easier to not look at the implied threat by blaming the other for their poor communication skills.

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  16. "division of labour" ?

    Oh no, no; way too radical - that'll never catch on.

    Especially when the world is so full of geniuses who know, and do, everything and especially your speciality better than you do.

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  17. Yes, alternative usage of time. A very economic term. Lately I started to follow in YouTube panels and lectures in natural sciences, mainly astrophysics, quantum theory and all the rest. We economist can envy these scientists. They succeeded to popularise the most complicated terms in physics, chemistry, biology etc. They do it without derivatives, integrals, or even probability. I know nothing of this kind produced by economists. Probably the leading economists are to busy to create such a platform like world science festival, where you can meet Nobel laureates in every field of science except of economics. hi

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  18. Since it's the job of the media to mediate, I would think the burden would be on journalists to understand the lingo of academic economists and translate econspeak into something the man or woman on the street understands. Alas, it seems that journalism degrees equip graduates with skills aimed towards catching eyeballs than acting as mediators. The role of the journalist should be "jack of all, master of none."

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  19. "...it beholds those of us with some knowledge to try and communicate it..."

    "behoves", not "beholds"

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  20. I think what you do on this blog is better than any PR would be. PR is essentially selling a product or an idea. You're presenting ideas. That in of itself (you don't have a profit motive) makes you more credible.

    What I think we need is more of a presence from you and other like you. And there is a model. It's Paul Krugman. He has a blog at the most influential newspaper in the world, and appears on a Sunday TV show among others.

    We need more Paul Krugmans - you, Joe Stiglitz, Dean Baker, Brad Delong, Larry Summers (he's already very public) and others would serve us best not by doing PR but just saying what you're saying on your blogs to a wider audience. Macroeconomics can be counterintuitive to the public. They need your help. Not your PR.

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  21. The problem is SImon, macro-economic theory does not have the answers. If you want to understand how for example individual or social including national behaviour leads to depressions or low interest rate environments, you will not find your answers in neo-classical, including rational expectations optimisation models. Your answers are going to be found in the history, anthropology, philosophy and psychology literature. So you are going to have to learn other areas. Many social scientists find they have to work across areas. That is the nature of the world we live in. It is complex, intelinked and requires knowledge of multiple fields. In fact you would have a better understanding of the economy if you didn't study rational expectations models at all and you studied widely. The problem is economists don't do that, they want to fit everything into a standard model even it it is blatantly wrong - it is what Lar's Syll calls a "methodological straightjacket" that blinds us from really understanding what is going on.

    Good advice from Keynes:

    The master-economist must possess a rare combination of gifts .... He must be mathematician, historian, statesman, philosopher—in some degree. He must understand symbols and speak in words. He must contemplate the particular, in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man's nature or his institutions must be entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood, as aloof and incorruptible as an artist, yet sometimes as near to earth as a politician"

    So as you can see saying "as well as reading other literatures is not only annoying, it makes no economic sense" is no good. It is very, very, bad.

    NK.

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  22. I don't think anyone could possibly blame you Simon. Through this blog, you are responsible for more popular economic enlightenment than a thousand less engaged economists. But the profession as a whole is not so engaged.

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