I want to say a few words about the outlook for the economy in general and employment in particular, but before I do I have to issue a standard consumer warning: economists have a very bad record in forecasting what will happen in the economy, so you’d be wise not to take a blind bit of notice of anything I say.
But let me give you my prediction: the economy’s performance this year is likely to be just a fraction below average,...
Thursday, February 2, 2012
Wednesday, February 1, 2012
Damned lies and economic modelling
One of my resolutions this year is to spend more time trying to prevent lobby groups from using dodgy economic "modelling" to mislead my readers. Canberra has developed a bad case of modelling mania, but most of it is dubious. The less you know about modelling, the more it impresses you.
Any day of the week you can hear politicians demanding to see the modelling behind some figure the government has produced (even if Treasury...
Monday, January 30, 2012
Europe has serious troubles, but we don’t
The economic news from Europe in recent days hasn’t been good. And it could get worse as the year progresses. Those guys have big problems. But let’s not spook ourselves by imagining it to be any worse than it is.
Unfortunately, there’s been a tendency in parts of the media to convey an exaggerated impression of how bad things are and of the extent to which Europe’s problems translate into problems for us.
Take last week’s...
Saturday, January 28, 2012
All hail mighty Aussie dollar, as it's here to stay
This year we'll see more painful evidence of Australian businesses accepting the new reality: our dollar is likely to stay uncomfortably high for years, even decades.
It has suited a lot of people to believe that just as the resources boom would be a relatively brief affair, so the high dollar it has brought about wouldn't last.
If there were no more to the resources boom than the skyrocketing of world prices for coal and iron...
Wednesday, January 25, 2012
Economic fixes must offer a fair go for all
When you listen to street interviews with people in the troubled countries of the euro zone, a common complaint emerges: whereas some people waxed fat in the boom that preceded the crisis, it's ordinary workers who suffer most in the bust, and they and even poorer people who bear the brunt of government austerity campaigns intended to fix the problem.
In other words, achieving a well-functioning economy is one thing; achieving...
Sunday, January 1, 2012
WHAT MAKES A GOOD LIFE?
January, 2012
Mainstream economics is about enabling people to lead a prosperous life; it’s about telling the community how to be more efficient in its use of scarce resources, with the objective of raising our material standard of living. But is a prosperous life a good life? Not necessarily. So what’s the relationship between prosperity and a good life? Or, to put the question in its classic form, does money buy happiness?...
Monday, December 26, 2011
Moneyball shows competition isn’t always a winner
One of my favourite films for this year was Moneyball. Ostensibly, it's the story of how the real-life Billy Beane (Brad Pitt), general manager of the Oakland As baseball team, took the second-poorest team in the comp almost to the top.
At a deeper level, it's about how the super-cool guys of professional baseball got beat by the nerds.
It's about how the science of statistics can tell us things we didn't know about our world.
It's...
Saturday, December 24, 2011
A little regulation brings out the best for all of us
Ask economists who is the father of economics and almost all of them will say Adam Smith. But a new book makes the amazing claim the true father is Charles Darwin. And if you ask economists the question in 100 years' time, that's what they'll say.
The book is The Darwin Economy, by Robert Frank, professor of economics at Cornell University.
Smith was the Scottish moral philosopher, who published his most famous work, The Wealth...
Wednesday, December 21, 2011
How to get more bang from your bucks
The retailers may be worried we aren't spending enough this Christmas, but that doesn't mean most of us aren't spending a fair bit. We always do. And, of course, for those of us off on summer holidays, the spending doesn't stop on Christmas Eve.
Economists are great apostles of efficiency, which they advocate so we have more money to spend on consumption. Strangely, however, they have little interest in how efficiently we spend...
Monday, December 19, 2011
Secret of successful economy is 'frameworks'
The proof we suffer from an economic cringe as well as a cultural one is our tendency to attribute our better position relative to the other advanced economies purely to good luck. In truth, it's owed as much to our markedly superior economic management over the past 20 years.
What? Poor little Oz runs its economy far better than the mighty Yanks and the haughty Europeans? You betcha.
Last week both Ric Battellino, deputy governor...
Saturday, December 17, 2011
Economy follows wherever our moods take us
To anyone but the economists and financiers, getting to the bottom of what the problem is in Europe is hellishly complicated. The more you read the more confused you get. But you can boil it down to the combination of the availability of credit and what Keynes called ''animal spirits''.
To anyone but the economists and financiers, getting to the bottom of what the problem is in Europe is hellishly complicated. The more you read...
Wednesday, December 14, 2011
PM Gillard: hard worker, hard-nosed, hard to read
Having observed Julia Gillard's government for more than a year, I must say she's hard to pigeon-hole. Is the woman who changed the government's mantra from "working families" to "hard-working families" a typical Labor prime minister, as many business critics of Fair Work believe, or a pale imitation of a Liberal leader, as her willingness to sell uranium to India and her opposition to same-sex marriage lead many critics on the...
Monday, December 12, 2011
Reserve has re-assessed outlook for world growth
Just as a stopped clock is right twice a day, so the financial markets' belief that Europe's sovereign debt problems are the primary factor influencing the Reserve Bank's decisions about interest rates, having been wrong for most of the year, has finally proved on the money.
A psychologist would say the financial markets have been suffering a "salience" problem. Their judgments about how the Reserve will adjust the official...
Saturday, December 10, 2011
Nice set of figures should shut up the gloomsters
Something strange is happening to the Australian psyche at present. A lot of people are feeling down about the economy. They're convinced it's pretty weak, and any bit of bad news gets a lot of attention.
But most of the objective evidence we get about the state of the economy says it is, under the circumstances, surprisingly strong. Consider the national accounts we got this week.
They show the economy - real gross domestic...
Wednesday, December 7, 2011
Breakdown in relations is everyone's business
I get to meet a lot of famous and interesting people in my job, but few have had more influence on me than Dr Michael Schluter, the social thinker, social entrepreneur and founder of Britain's Relationships Foundation.
They say genius is being the first to say the obvious. If so, Schluter is one. I'm sure Socrates or Aristotle beat him to it but, in our time, Schluter is the first to forcefully remind us of something we all...
Monday, December 5, 2011
Business economists play politics over budget surplus
Business economists have been surprisingly critical of Julia Gillard's efforts to keep her promise to return the budget to surplus next financial year, but if I were her I'd have done much the same thing.
She, her cabinet and her econocrat advisers turn out to have a much better understanding of real-world macro-economic management than the know-it-all business economists.
Their repeated statements that the government's obsession...
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