Here is a question. A woman, a wife, dies in an accident that was in no way her fault. She does not work, but her husband still has to be compensated for her loss. So, in terms of cooking, cleaning, washing, ironing, and love, what is her life, or her death, worth? Believe it or not, but professional economists are frequently asked to answer such questions, with reasoned arguments, annotated spreadsheets, and so forth — by insurance companies. And they do the work – for a fee – either as honestly as possible, or, often, with the interests of an employer in mind. Thanks to the superlative CBC Radio show, Ideas – It’s the Economists, Stupid, November 28th – I came across Professor Richard Dennis of the Australia Institute, an economics think-tank. A former university economist and lecturer, Dennis is a very interesting fellow, who, as some might say, is now the bane of his fellow economists. He points out that economists have become the new priests or shamans, telling us what the ‘markets’ say or want, the way priesthoods in antiquity, or in primitive cultures, would invoke dictates of the gods. The markets, Dennis says, tell us nothing but what people with millions invested in them want us to believe. But he reserves his greatest scorn for ‘economic modelling’. Just as a model train or car is not a real train or car, Dennis says that economic models do not necessarily reflect reality in any way, but rather indicate an outcome desired by whoever commissioned them. In other words, to put it kindly, they are just opinions – and not the hard evidence they are usually proclaimed to constitute. A notorious example, says Dennis, is that of oil-pipeline companies. He has some egregious examples from Australia – where a company boasting 44,000 new jobs could actually provide none, when their numbers were unravelled – but he also points to claims currently being made by companies in Canada. They all use something called ‘Input-Output’ modelling, which ostensibly fudges funds and labour invested with profits and jobs to be delivered. Dennis uses the analogy of a GDP incorporating the goods and services provided by every single privately-owned house in a country – the value of warmth, protection, shelter, accommodation, pleasure, and so forth. According to his critique, we should examine far more carefully the claims of Kinder-Morgan, Northern Gateway, and the others, all of whom make extravagant boasts about the jobs their pipelines will bring people along the way, and the immense tax-benefits their vast profits will accord governments. More often than not, says Dennis, these claims are lies based on deliberately skewed economic modelling. As prognosticators, economists have an especially dismal record – yet no one remembers it, because the shamans are busy predicting the next catastrophe, or sometimes the next great thing.
The rat’s breakfast of contemporary economics is not without levity. A pundit wrote that nurses ought to be poorly paid, because low wages attracted only the most altruistic to the profession – and, wrote this wretch, altruism is the most necessary quality for a nurse. This prompted another economic wag to counter that CEOs ought to be poorly paid, since this would ensure the kind of essential altruism that puts shareholders and staff above personal concerns.
It used to be said that, ‘There are lies, damned lies, and statistics’. Clearly, we did not realize that, behind the concocting of statistics, were always economists. In an era where so many major decisions are based on fiscal oracles, perhaps we need to take these spurious prophecies with more than a pinch of salt – which, after all, was a prime form of currency for the Romans.
Paul William Roberts