The economic story du jour is the appreciation of the CAD, and Peter Mansbridge had a panel of economists on The National last Tuesday to discuss it. I get the impression that this is a semi-regular recurring feature. The discussion was - how shall I put it? - unsatisfying.
The nadir was established by Patricia Croft, who is apparently the chief economist at some RBC thingy. This is what she said when asked what can be done about the appreciating CAD, around the 1:15 mark of the clip (my transcription):
[T]here's not a lot we can do, Peter, because the foreign exchange market is the deepest, most liquid market in the world. The daily turnover in the foreign exchange market is about $4 trillion, and the Bank of Canada has reserves at its disposal to intervene in the market to try and weaken the dollar; those reserves are about $50 billion.
So that's a drop in the bucket. So I don't think there is a lot that Canada can do, but I think we'd better get over fretting about it and stick to reality. And that is that we're going to have to learn to live with a stronger Canadian dollar.
Now, let's put this into some context. This wasn't something Ms Croft came up with off the top of her head. She was on national television in her capacity as a professional economist to talk about the appreciating CAD. She clearly had time to prepare her opening remarks. And they were COMPLETELY WRONG. As in fail-my-second-year-macro-midterm wrong. What Ms Croft was talking about is the limited capacity of the Bank of Canada to prevent the CAD from depreciating. As the survivors of my Théorie macroéconomique II class can tell you, the resources that the Bank has to prevent an appreciation are essentially infinite.
As I said, that was the nadir. Even though Jim Stanford of the CAW didn't agree with her recommendation, he didn't see fit to correct her on that point. It wasn't until the clip from an interview with Mark Carney that viewers were presented with a clear description of the options available to the Bank of Canada. The net contribution of the panel to improving public understanding of an important policy issue was approximately zero, if not negative.
How does stuff like this happen? Again, this was not some hastily-put-together group assembled by a shoestring operation; The National is the flagship news program of the country's public broadcaster. I don't doubt that the CBC thought that this panel was the best they could do. And the really sad thing is that they're probably right.
And no, I'm not complaining that they should have invited me. I can think of dozens of people who are more knowledgeable than I; I'd much rather hear their thoughts. But the CBC didn't call on them, because their journalists don't know who to contact. And there's a good chance that these academics would say no, because they simply wouldn't see the point of such an investment of their time.
This is from my very first blog post, back in September 2005:
Canadian academic economists have a low public profile. Offhand, it's pretty easy to come up with at least three reasons for that:
- We're Canadian.
- We're academics.
- We're economists.
That pretty much adds up to the trifecta in the category of "people whose opinion is not eagerly sought out".
But I think there's more to it than that. There are lots of people whose opinion isn't in any particularly great demand, but who seek the spotlight anyway in order to promote their policy agenda. What's special about us is that we don't seem to need to do that. The Canadian economics community is pretty small, so academic and public-sector economists know each other fairly well. Government economists are people we've met at conferences, people we've gone to graduate school with, or (more and more frequently for me) people we've had as students. We don't need to mount a public relations campaign in order to get a sympathetic hearing at the Department of Finance or the Bank of Canada.
Three of the most important policy initiatives that have been implemented by the federal government during my career are the FTA/NAFTA, the adoption of the Goods and Services Tax (GST), and the Bank of Canada's decision to adopt inflation targets. None of these policies can be characterised as a being a response to popular opinion: they all had their origins in the interactions between academic and public-sector economists. Even if this process has had the effect of producing good policy outcomes, the disconnect between how policies are made and what is being discussed in public is not healthy in a democracy.
Academic economists play an important role in developing Canadian public policy, and we have a commensurately important obligation to try to explain them as best as we can to the non-economist public.
Even after applying the rule-of-ten, the Canadian economics blogosphere remains woefully under-developed when compared to that of the US.