• rmacculloch

Wellington Hates Economists (Free Enterprise will suffer)

Below is my opinion piece for the National Business Review this week,

A new style of bureaucrat is being promoted in our capital city. The profile is someone who has “broad experience”, a person with life skills. Expert knowledge is not appreciated any longer. Take, for example, the NZ Treasury. It wants to hire economists who’ve never studied economics.

In a recent job advertisement for a "Senior Analyst" who is expected to "operate at the forefront of economic thought and policy to enhance the well-being of all New Zealanders", the Treasury states that it is "seeking a well-rounded candidate - an economics background is not essential".

Imagine a law firm advertising for a lawyer who doesn’t need a legal background? Or a civil engineering firm wanting an engineer to help build a bridge for whom an engineering background is “not essential”.

What's more, the ad says that the Treasury wants successful candidates to have a "good EQ". It seems a person’s "Emotional Quotient" is more important than their "Intelligence Quotient" in Wellington these days.

On top of it being fine not to know economics when working for an employer tasked with providing cutting-edge economic advice to the Finance Minister, it seems you may not even have to turn up at the office.

Yes, you can stay at home and “Zoom”, since the Treasury has "Flexible work arrangements" and provides "encouragement to enjoy a positive work / life balance with and a range of health and well-being initiatives".

The grammatical mistake in the above line isn’t mine. Being able to write properly doesn’t appear to be important in Wellington either any longer.

Another example of the shafting of economists in our capital city relates to the Reserve Bank’s Monetary Policy Committee (MPC). There are folks on it with zero background in how monetary policy works. How come? Well, the Finance Minister has formally “excluded from consideration any individuals who are engaged in, or likely to engage in future, active research on monetary policy or macroeconomics”.

Why? The answer is pretty obvious. The government does not want experts on that Committee who actually know something about the topic and so may not buy into the official “narrative”.

Imagine a top monetary economist on the MPC who started blaming the Reserve Bank’s $100 billion Quantitative Easing Programme for our high inflation rate. That would be unacceptable. Such diversity of belief is not appreciated, no thank you very much.

Let me explain. The Prime Minister has formally stated in Parliament that our high inflation rate is due to overseas factors. So a departure from that line by anyone who has done research showing domestic policies, like closed borders and money printing, have played major roles becomes a threat. Ban them from prominent positions. Label them a stirrer.

What’s ironic about Wellington’s disdain for expert economists is that it occurs at a time when medical experts are being lauded by officialdom. Could it be that some of the latter are more ideologically on side with Labour compared to the economics ones? Are experts desired only insofar as they give our politicians answers they want to hear? Could expertise in a subject not be such a desired quality as the government pretends?

You may think that this is just a small-minded story of how economists are being run out of Wellington by Human Resources in favour of folks with other qualifications, so why should you care? Well, there is one big reason, at least to the extent you’re running or working in a business.

By training, most economists are wary of government intervention. They are educated to be well-versed in how markets can work well to achieve good social outcomes and also how markets can fail. Economists know that even when there is a failure, interventions can make matters worse.

So when a government wishes to regulate, economists are, by nature, suspicious. For starters, they want to be sure there truly is a market failure that needs correcting. Maybe the new rule is just being designed by politicians to empower themselves, or being advocated by a lobby group wanting to eliminate a competitor.

Should an intervention be justified, economists usually favour ones that encourage competition and respect private property rights as much as possible. They try to avoid introducing bad incentives and encouraging corruption which thrives on heavy regulation.

As examples, many in the profession favour charter schools and keeping costs down in public health-care systems by promoting competition in the supply of services. Many favour emissions trading schemes where permits are auctioned compared to command-and-control environmental rules.

Most economists believe high taxes create disincentives to work and innovate, which creates trade-offs should one wish to reduce inequality. The profession largely acknowledges that high inequality is a choice made by some countries, for example, where the cultural ideal of the “American Dream” is important. Under this view, rags to riches stories are common, so the government should let them happen by cutting red-tape.

In this sense, Wellington’s distaste for economists can be understood. Because the profession is not characterized by knee-jerk big-government types, its’ members have become ideologically unacceptable to Kiwi politicians and bureaucrats who thrive on red-tape, centralization, moneyprinting, higher taxes and less competition in the welfare state.

Economists with off-script views about how better social outcomes can be achieved with little intervention, or by using approaches with marketbased characteristics, are simply not wanted close to our government.

Even though students with high level expertise in economics have become extraordinarily sought-after overseas with awesome job opportunities, ranking alongside medicine and computer science, not in NZ. The best route to being a big shot in the windy city is to have a fluffy background. Let’s face it. Wellington hates economists. Kiwi free enterprise will suffer.