Monday, October 6, 2008

All Economic History is Fiction

ABC Radio National’s Counterpoint seems to draw on the right-wing think tanks for many of its guests. Jennifer Marohasy, Senior Fellow at the Institute of Public Affairs, well known climate change denier, is a regular on ABC radio.

So it was time to call in the big guns last week to defend capitalism and free markets against the pro-regulation push. The segment on Counterpoint last week was Free Markets and Regulation. Their guest experts on matters economic and financial were John Roskam, the executive director of the Institute for Public Affairs and Dr Stephen Kirchner, research fellow at the Centre for Independent Studies.

The discipline of economics is a difficult arena at the best of times. Often derided as the scientists of hindsight, economists seem to specialise in convincing us why last year’s wrong prediction was the correct one at the time. A political-economy paradox perhaps. Counterpoint’s two terriers should have stuck to theory. Instead they ventured into the murky waters of economic history.

First, John Roskam shared his critical analysis:

I hope it's not a failure of capitalism quite yet, Michael but, as Stephen was indicating, what we saw in the 1980s was the Clinton administration in the US encouraging banks to lend to people on low incomes…
Perhaps it is the fault of the Clinton administration. Unfortunately for John, Bill's government lasted from January 1993 till January 2001. Perhaps the blame really belongs to Ronald Reagan or George Bush Senior’s terms in office during the 1980’s. Unlikely though, since they were conservatives.

Next, Stephen had a go at things historical:
There's a precedent for this in terms of the Resolution Trust Corporation which was set up to buy up the assets of the savings and loan industry that got into trouble in the early 1990s…
Wrong again! The RTC was set up in 1989 as a result of the S & L crises of the 1980’s. Reagan can cop that one. A bit closer than John but not quite there.

If we are going to learn from economic history, let’s at least get the facts straight. Economists love to use graphs. A timeline might prove more useful at times.

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3 comments:

Guy said...

Surely it would be more interesting to have two people with opposing views debate each other; rather than two people likely to have similar views smear it on with a brush?

Kevin Rennie said...

It is ironically called counterpoint. I suppose because the ABC is supposed to be a nest of left wing fellow travellers. See my post on God's Next Army for a contrary view.

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