Where economics went wrong, by David Blanchflower
The Independent’s economic columnist David Blanchflower has a chapter in a new book. It can be found here (entitled “Where were you?” in the “forthcoming books” section).
In the chapter, David brings together many of the arguments of his fizzing recent columns for The Indy – such as how the Bank of England completely missed the Great Recession, how Labour’s fiscal stimulus helped boost growth and how the Coalition deluded itself into believing that fiscal consolidation would be expansionary.
But David also argues that something went disastrously wrong in the profession of academic economics in the years before the crash.
It became, in his view, woefully uninterested in hard macro data:
“Academic economists seem to me to have little knowledge of where the economy is and any interest in data revisions, qualitative surveys of even macro-forecasting. When I was at the Bank of England trying to work out whether the economy was collapsing and needed outside advice on what was going on in the economy I received little help.”
Academic economists also stopped grappling with important questions, instead focusing on irrelevant ephemera. As he puts it:
“A ‘major’ contribution on a totally trivial technical point in the economics profession usually receives more approbation and attention, and even a salary increase than a small contribution to an important question. Trying to solve some narrow theoretical point may well be less than useless. The big emphasis on theory in many UK economics departments seems to have been a mistake as it has done little or nothing to improve the human condition. Playing clever mind games, which is the equivalent of counting angels on pinheads, should be a hobby rather than an activity subsidised by the British taxpayer.”
There’s also a rather striking table in the chapter that David has compiled from OECD data which shows just how weak the UK’s economy has been by comparison with our economic peers since the end of the recession.
I’ve pruned it and turned it into a chart here:
So, after crisis-rocked states such as Greece, Portugal, Ireland, Spain and Italy, the UK has had one of the weakest expansions in Europe in the past three years. Our cumulative quarterly percentage GDP growth has been worse than the eurozone average – something to remember next time the Chancellor complains that the Continent’s spiralling crisis is dragging Britain’s economy down.
There’s plenty more interesting stuff like this in David’s paper so do check it out.Tagged in: David Blanchflower, economics, eurozone, gdp, growth
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