Maths or no maths? Ross Gittins and Richard Holden have it wrong

By MILLIE MUROI, Economics WriterWe’ve heard the old(er) boys argue over the optimal level of maths in economics, but they’ve delivered some imperfect information. Don’t know what I’m talking about?Seven years after sitting my final high school economics exam, four years after farewelling university economics, and three years since exiting the economics profession (almost) entirely, I’ve been reflecting.The reason? A clash between...

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In 50 years, Trump will be remembered as just a puzzling footnote

I know I’m a bit late, but welcome to 2025. Before we get on with a year of absolutely gratuitous economic angst courtesy of a great American conman’s second coming, let’s take a breath and realise we’re already a quarter of the way through what many still think of as the “new” century.How time flies while you’re preoccupied with one crisis – one damn thing – after another. I hate to undercut the media’s business model, but old...

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Want more economics students? Drop the obsession with maths

The Reserve Bank is worried. The number of students wanting to study economics has been falling over the years, and it’s worried this will lead to a fall in the electorate’s economic literacy, which could end up worsening government policy.And the Reserve, being by far our biggest single employer of economists, may be worried its choice of potential recruits will deteriorate.An article by the Reserve’s Emma Chow, published last...

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Oligopolists gouge power and gas prices, Albanese cops the blame

If, as seems likely, Anthony Albanese and his government lose seats at next year’s federal election, one thing we can be certain of is that the nation’s economists and econocrats won’t be admitting to their not insignificant contribution to Labor’s setback.Economists have such a limited understanding of how the behaviour of the real-world economy differs from the economy described in their textbooks and measured in their econometric...

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When funding healthcare, don't forget the caring bit

 It’s Easter, and we’ve got the day off. So let’s think about something different. As a community, we spend a fortune each year on health, mainly through governments. What has economics got to tell us about healthcare? And, since it’s Easter, what light has Christianity got to shed on how we fund healthcare?One man who’s thought deeply on these questions is Dr Stephen Duckett, Australia’s leading health economist, whose...

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'Planetary boundaries' set the limits of economic freedom

One of the most important developments in economics is something in which economists had no hand: the identification of the environmental limits which humans, busily producing and consuming, cross at their peril.Earth has existed for about 4 billion years and humans have lived on Earth for about 200,000 years. For almost all of that time we were hunters and gatherers, but 10,000 to 12,000 years ago we settled down, to farm and...

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What's kept us from full employment is a bad idea that won't die

Lurking behind the employment white paper that Treasurer Jim Chalmers will release today is the ugly and ominous figure of NAIRU – the non-accelerating-inflation rate of unemployment. If the Albanese government can’t free itself and its econocrats from the grip of NAIRU, all its fine words about the joys of full employment won’t count for much.The NAIRU is an idea whose time has passed. It made sense once, but not anymore. The...

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Productivity debate descends into damned lies and statistics mode

Last week we got a big hint that the economics profession is in the early stages of its own little civil war, as some decide their conventional wisdom about how the economy works no longer fits the facts, while others fly to the defence of orthodoxy. Warning: if so, they could be at it for a decade before it’s resolved.Economists want outsiders to believe they’re involved in an objective, scientific search for the truth and are,...

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Don't let an economist run your business, or bosses run the economy

A lot of people think the chief executives of big companies – say, one of the four big banks - would be highly qualified to tell them how high interest rates should go and what higher rates will do to the economy over the next year or two.Don’t believe it. What a big boss could tell you with authority is how to run a big company – their own, in particular. Except they wouldn’t be sharing their trade secrets.No, in my experience,...

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Why economists keep getting it wrong, but never stop doing sums

Why are economists’ forecasts so often wrong, and why do they so often fail to see the freight train heading our way? Short answer: because economists don’t know as much about how the economy works as they like to think they do – and as they like us to think they do.What happens next in the economy is hard to predict because the economy is a beehive of humans running around doing different things for different reasons, and it’s...

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Never ask an economist to tell you a story

Tell me, are you planning to read any good books over the break? Maybe go to the movies? Certainly, watch a fair bit of streaming video? I bet you are. And I bet most of what you read or watch will be fiction.If it’s non-fiction, it’s most likely to be a biography – the story of someone’s life.How can I be so sure? Because, though it’s taken economists far longer than anyone else to realise – and many of them still haven’t read...

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Treasury thinks the unthinkable: yes, intervene in the gas market

If you think economists say crazy things, you’re not alone. Speaking about our soaring cost of living this week, Treasury Secretary Dr Steven Kennedy told a Senate committee that “the solution to high prices is high prices”. But then he said this didn’t apply to the prices of coal and gas.How could anyone smart enough to get a PhD say such nonsense? He even said – in a speech actually read out by one of his deputies – that this...

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How human psychology helps explain the resurgence of inflation

The beginning of wisdom in economics is to realise that models are models – an oversimplified version of a complicated reality. A picture of reality from a particular perspective.I keep criticising economists for their excessive reliance on their basic, “neoclassical” model – in which everything turns on price, and prices are set by the rather mechanical interaction of supply and demand.It’s not that the model doesn’t convey...

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Don't expect great productivity if we give business an easy ride

An unwritten rule in the economic debate is that you can say whatever you like about the failures of governments – Labor or Liberal; federal or state – but you must never, ever criticise the performance of business. Maybe that’s one reason we’re getting so little productivity improvement these days.One reason it’s unwise to criticise big business is that it’s got a lot of power and money. It can well defend itself but, in any...

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Why the political duopoly is losing market-share

If you hadn’t noticed, economic policy and politics are closely entwined. And economic journalism is a just specialty within political journalism. But some parts of economics – agency theory and industrial organisation, for instance – are surprisingly useful in understanding how politics works.The big surprises in this election weren’t the election of Labor, but the steep decline in the two major parties’ share of the primary...

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