Economists and the public – this really is a complicated affair. Last week, Kartik Athreya, a senior research economist with the Federal Reserve Bank of Richmond, claimed that economics is harder than most economic bloggers realize. Hence, according to Athreya, most economic bloggers do not “have anything interesting to say about economic policy” (here’s my opinion on that matter). His paper entitled “Economics is hard. Don’t let bloggers tell you otherwise” infuriated the blogosphere.
This week it is the German economics professions turn: Economic professors in Germany are about to establish a “plenum of economists” (“Plenum der Ökonomen”) . Currently, the proclamation for the foundation of such a forum is being circulated among academic economists in Germany (initally I made the original document available on my blog, but I was asked by the initiators to remove it ). This forum is supposed to be a “virtual parliament” of all German university economists. Around 30 professors already have signed the proclamation.
The founding fathers claim that “economics in Germany is lacking an appropriate forum which allows the profession to raise its voice competently, concisely and quickly regarding questions of national interest”. The detailed proceedings of the plenum are not lined out in the founding manifesto. The basic idea, however, seems to be to generating consensus views on important economic policy issues.
The Euro crisis is the background of this initiative. The manifesto refers to the „threat of a default by Euro zone countries”. According to the professors the German government, the German parliament and the ECB had to made historic decisions in a very short period of time. They write: „We are all united by the knowledge that this situation, which was perceived as an emergency, could only evolve because several warning signals, which were visible for quite a long time, have not been appropriately appreciated by policymakers. We are all united by the fear that policy makers have been driven by the events and did not have enough opportunities to thoroughly ponder the far reaching consequences of their decisions.”
Well, I don’t really know if I should laugh or despair. First of all those never-ending sentences in itself are quite telling. Their heavy handed style of writing shows that the professors are not really the slickest communicators. Apart from that I do really wonder in which world those guys are living. There already is a bunch of public forums around where economists can raise their voice and discuss their views: First and foremost there are VoxEU and their fledgling German sister site “Ökonomenstimme”. VoxEU, which is run by the CEPR, has masterly shaped the debate around the crisis. Among other things they published several highly influential e-books, for example on the euro zone rescue and global imbalances.
However, the idea of a “virtual parliament” of economist which designs joint economic statements reveals a strange yearning for a single truth. The supporters of the “plenum of economists” seem to believe that they exactly know what has to be done in economic terms and that they only have to tell it more efficiently to the stupid politicians.
That’s a big misconception. There is no such thing as an eternal truth in economics. The current crisis has revealed that important parts of mainstream economics were on a wrong track for decades. Hence what we need is a more pluralistic discussion in economics, not a central clearing house for the mainstream view.
The policy advice of mainstream economists was misguided – for example with regard to the deregulation of financial markets. Contrary to what the manifesto says only very few economists saw the early warning signals of the crisis. In Germany, the quality of economic counselling was especially bad. Handelsblatt in the last couple of years twice uncovered that major economic think tanks ignored recent internationally accepted research on major economic policy issues (minimum wages and fiscal policy). It took forever until most academic economists in Germany realized that the world was on a brink of a second Great Depression. The German Economic Association even managed to organize an annual meeting in the autumn of 2008 without a single session dealing with the financial crisis.
Given all this I’m pretty sure that the “plenum of economists” will be a gathering of know it alls who will advocate their same old, wrong ideas.
Let’s hope they can convince me otherwise.