Just an example of the newspapers we might make fun of Credit- public domain via Wikipmedia

A seriously startling assertion in the economics leader in The Observer today:

It seems it is still seen as radical to analyse the flows of money in the world as if much of it was stolen, and how that skews investors’ decisions. But it’s not radical: it’s a fact. Tax alleviation structures dominate company decisions, but are rarely debated by students. Some of the money will be drug money or gains from organised crime. But most of it will be money that avoided tax in the country where it was generated.

The avoidance of tax is, by very definition, obeying the law. And yet there we’ve the assertion that this is akin to theft. We seem to have a newspaper firmly rooted in reality here, don’t we?

Still, what does amuse is that we’ve a corollary of Muphry’s Law here. That any column complaining about economics or the teaching of it will contain bigger howlers than those being complained of.

Britain’s economics students are dangerously poorly educated
Phillip Inman

Hmm, well, yes.

Last year the chief economist at the Bank of England, Andy Haldane, gave a fear-inducing speech that warned of Armageddon in the jobs market. Robots threatened 15 million UK jobs, he said.

This dystopian picture of busy machines and queues of jobless Britons was replaced this month by a rosier view from PwC, which made the opposite claim: robots and artificial intelligence could create as many jobs as they destroy, which happens to be around 7 million.

Then the University of Oxford said 35% of UK jobs could be automated, while a 2017 McKinsey report warned 5% of UK jobs were highly automatable. The MIT Technology Review has identified at least 18 different predictions about automation.

This article is not about robots, AI or even the debate raging over the impact of Brexit. It’s about the detachment from history and real life – stemming from a disastrously narrow education – that allows economists to make such claims, and the damage that does to public debate about important matters.

A sensible historical view would suggest that we’ve been automating human labour for 250 years or so now. That job destruction is about 10% of the workforce each year, quits another 10%, job creation and job hiring amounting to 20%. Unemployment is only the mismatch between the destruction/quits rate and the creation/hiring one.

Moreover, the group said, “when political decisions are backed by economics reasoning, as they so often are, economists are unable to communicate ideas to the public, resulting in a large democratic deficit.”

You could easily level that criticism at the economists forecasting the impact of AI. What are people supposed to think when those who study the field come up with such wildly varying predictions? More importantly, what will politicians think they should do? Nothing, probably, given the confusion.

Well, yes, the politicians should do nothing about automation because nothing new is happening. Aa an entirely conventional economic education would tell us as I worked that out on the basis of nothing more than an undergraduate degree in the subject three or more decades back.

But here’s a lovely error:

If they were diverted into discussions of economic history, they might find out we are about to repeat the mistakes of the past and trigger another financial crisis. Even more inhibiting, their course might show that higher inequality dampens workers’ incentives to increase productivity, and might prompt them to ask why young economists in the City are paid colossal amounts of money to analyse bond yields or forecast oil prices. Pay them less, share the money around, and productivity might improve. Failing that, let a robot do their job.

Moving money, as in pay, around doesn’t change productivity in the slightest. It’s measured as hours of labour in with respect to value of production out. Changing peoples’ wages, redistributing this, doesn’t change that calculation in the slightest. And if Phillip Inman, economics editor of The Observer, had had a decent economics education he would know that.

Perhaps we should call this Worstall’s Corollary to Muphry’s Law?

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4 COMMENTS

  1. Haven’t we been automating human labor since the wheel, or even further back to when some guy thought that a pointed stick was superior for killing game than ten guys trying to wrassle down a mastadon?

  2. For evidence of the assertion in the headline, you need look no further than the frequent utterances of House Speaker Wannabee Nancy Pelosi, that Trump’s reduction in the corporate tax was a “give-away to the rich.” You see, all earnings properly belong to her.

    Compared to colonial America, virtually no one is tending the fields, thanks to automation, but harvests are higher than ever. The offspring of farmers are in other fields, as government did not used to accept the excuse that refusal to adapt to innovation was the fault of the innovator. Now we react to global trends by setting up Remediation Funds to hear excuse-making and cut checks.

    It is a lie that “inequality dampens workers’ incentives,” as obviously, enforced equality would entirely remove any incentive to work harder.

  3. How many of those statements were actually made by economist and not people working in those fields that think being clever at one thing allows them to pontificate on everything…hawking has spoken on this subject and he is neither an AI robotics expert or an economist

  4. How have so many people been allowed to escape from school without ensuring they have learned how to work out the background supporting facts for an assertion?

    I bang on about the Customs Union and immigration and electrical installation because I’ve made sure I know what I’m talking about, do background research and keep track of corrections. I don’t bang on about the Single Market because I can’t work out what the hell it is and can’t find anything that sensibly explains what being in/with/out/whatever actually means. But then that means it’s difficult to refute people’s assertions on the Single Market and, though I’m sure they’ve got it completely wrong, I know that I don’t know enough to clue stick them.

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