August 1, 2008
Should economists be taken seriously by policymakers?
I got the chance to discuss the idea on the Today program last Friday. Here’s the result.
Tuesday Oct 7 2008
All times are London time
About Tim Harford
I write leaders for the FT and two columns for FT Magazine: "The Undercover Economist", about economics in everyday life, and "Dear Economist", in which readers' questions are answered, tongue-in-cheek, with the latest economic theory. To find out about my books, "The Undercover Economist" and my new book "The Logic of Life", or about my radio series, More or Less, see timharford.com.-
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Do you mean people like Krugman, or real economists?
Posted by: Speedmaster | August 1st, 2008 at 2:18 pm | Report this commentWe can say yes to this question.But there is an important thing to consider. Economists relies on the economical theories in order to explain their thoughts and they presents their guesses and guessworks by using statistical methods. But in real life there are many variables to affect the situations.Everything does not always conform to the rules if human behaviour is discussed. Especially statisticians knows that human behaviour may not represent the normal distribution. In our social life people can affect each other, for example, threatens or worries have widens.Then some expectations borns in their minds.In these situations, economical politics which are being used must be seriously definite and strict. Economical politics will be getting more importance even though some economists are at the opposite site of the politics. Politics are part of the strategical plans. But strategical plans have also a dynamic energy so they can change if required. Policymakers should listen economists carefully while they are changing the economical plans.And then political views must be applied without hesitate.
Regards
Posted by: Cetin Ustaoglu , Executive Manager, 43 yo | August 1st, 2008 at 4:54 pm | Report this commentThere is a question that I have long asked of economists: ‘How does a central bank control a nation’s interest rates?’
It is a crucial rudiment of monetary policy that central banks exert such control. Yet in 8 years, even with financial incentives offered, I have not received a reasonable answer.
As these supposedly erudite people cannot supply an answer to a fundamental theoretical question, they should not be trusted by anyone.
Posted by: Gary Marshall | August 3rd, 2008 at 7:35 am | Report this commentEconomists do NOT claim that central banks control interest rates. Central banks influence interest rates via the use of monetary policy instruments such as open market operations and changes in reserve requirements but interest rates are the RESULT of supply and demand in financial markets. Having advised governments in many countries I can assure you that the average politician is woefully ignorant. Economists may not be infallible but they are a lot better than the alternatives
Posted by: Ian Stuart | August 3rd, 2008 at 10:14 am | Report this commentHello Mr. Stuart,
I did read your response.
You say that central banks influence interest rates through market operations and by changes in reserve requirements.
Since there has been little change in reserve requirements for member banks, and in recent history only moderations in the requirement, it remains doubtful that this imposition could have had any effect at all in the financial markets.
The open market operations are then the sole instrument for influencing interest rates. The size of the Bank of Canada, the Federal Reserve, and I presume the Bank of England are all quite puny in relation to the size of the respective nation’s financial markets. So how can any market operations by these comparatively small institutions have any profound or even mediocre influence on rates?
It defies reason.
That an economist is preferred to a politician is indisputable. However, given the opinions, reasoning, and actions of politicians the world over, I would think most anyone is.
Economists have made some grave miscalculations and theoretical blunders that are in need of urgent remedy. One of them is this impulse to repeat a silly absurdity in monetary theory that endures without any conceivable proof.
If you can show me my error, if you can resolve the perceived absence of that instrument or measure, then I am happy to retract my criticism of economists and acknowledge my ignorance that has itself endured this 8 years.
Regards,
Posted by: Gary Marshall | August 3rd, 2008 at 11:59 pm | Report this commentGary Marshall