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Stephen, I wouldn't be too down on Canadian economists and their contributions to public debate. Today I read the worst piece of economic journalism I've seen in at least a year:

http://money.cnn.com/2009/12/23/news/economy/cap_and_dividend/index.htm

Blurg

Perhaps Mr. Simpson should look at the failings of his own profession first. The reason the economics profession doesn't opine at length about public policy is that they really aren't ASKED. It's the journalists that treat both politics and the stockmarket as the never ending horse race (Harper's up! Harper's down! TSX's up! TSX's down!) Can't blame economists for reporting that fails to ask basic questions or inform the public. And whenever there is an analysis set piece, it is usually a trader or business leader that is asked to provide the sound bite.

All that said, there is something to be said about economists not offering a public friendly outward face which would allow journalists to feel like they would be doing something palatable to their readers by asking economists these questions. Take as an example Michael Geist, who is a law prof that has a very active blog on technology issues, and who has become a leading commentator on IP issues and other tech public policy issues. These policy analysis of these issues is way to complex for journalists (other than speculating whether "reforms" will "pass"). Yet he has managed to get some pretty decent public understanding of the impact of, for example, copyright reform and regularly appears in the media to comment on policy initiatives in the area.

I am a non-economist plebe interested in / exasperated with public policy. I became interested in these topics while watching housing markets balloon, seeing the wacky global financial imbalances, and read enough to predict the outcome that happened last October. It became exasperating during this that the media was so asleep at the switch as these systemic risks spiralled out of control (but the stock market was up, so the business noos today is good!) I enjoy this blog and Nick Rowe's if only for exposing me to the vast amount I don't understand. But frankly a lot of the posts are over my head and too opaque. More econ blogs, or analysis, or op eds, or something! that are more directed at interested generalists like myself would help economic analysis penetrate into the real world better, in my opinion.

Matt, the only thing worse than that train-wreck of an article are the comments that follow it. Yeesh.

Three points: a) the population is generally pretty clueless b) journalists are programmed to be 'fair and balanced' c) and controversy sells. It's easier and more profitable to write an article about the controversy around something like the GST cut, and avoid actually taking sides (since all sides are equally valid) than to write an article or do a TV segment explaining how the policy favoured by the vast majority of Canadians is actually pretty silly.

Anyway, Harper and Flaherty know it was stupid policy. They no doubt have an army of competent economists at finance telling them it's stupid policy. But that's beside the point. It's good politics. They gave the electorate what it wanted and set the stage for future 'starve the beast' policies. Don't be surprised when they start slashing funding for medicare, universities, the arts, and all the other stuff on the Western conservative hate list.


Canadian academic economists have not paid sufficient attention to our responsibility to participate in public debate.

Well, once you get back to blogging, here's a significant issue that is worth blogging about, is current, and of national interest and significance - the potential participation of the Fed Gov't (through direct subsidies, reduced royalties, accelerated capital cost allowance, building roads and infrastructure) or whatever form it takes in the Mackenzie Valley Pipeline.

http://www.theglobeandmail.com/report-on-business/mackenzie-pipeline-gets-a-boost/article1415219/

The The Joint Review Panel has released its report and is recommending that the project go forward with a list of conditions.

So, what are the pros and cons from an economic perspectives of the Fed gov't participating in this Imperial Oil and partners/TCPL project?

One note of caution - the Mackenzie Valley pipleine was once costed out at around &7-$8 billion. Then, in one fell swoop a few years it was increased to $16-$17 billion, giving Imperial Oil and others apparently more justification for financial participation of the feds. This was primarily a change in scope - ie the initial transmission system was $7-$8 billion, then they added on the costs of the gathering system which is normally held and regulated separately - a bit of pr spin going on here).

So, subsidizing the Mack Pipeline? Good or bad economic policy? (I can already reasonably predict what Calgary based think tanks etc might say)

I think that it is fair game for economists to comment on the state of federal finances, every time that the government issues the Fiscal Monitor, Budgets, and Economic Updates. Problems should be highlighted, as well as unrealistic assumptions.

This government has mismanaged the finances of the country, BEFORE the recession hit, and BEFORE the rollout of the stimulus measures.

1) As at the end of 2008, federal government revenues and expenses were equal. Treat that as the baseline. Spending was simply too high in 2008 (and 2007), when revenues were unusually high.

2) Government revenues are down 12% in 2009 per the Fiscal Monitor for October 2009. By the end of March 2010, the revenue shortfall will be in the neighborhood of $25B compared to 2008 (we are stuck with Harper's 2008 spending levels on the expense side of things). This the first problem, we are $25B in the hole and Harper is not honest enough to discuss the possibility of tax increases.

3) If interest rates increase in 2010 (as Flaherty "warned" Canadians last week), we can expect the interest expense on public debt to increase (from around $30B at record low rates) by at least $10B. Add that to the $25B revenue shortfall, and we are now $35B in the hole (before accounting for the stimulus measures).

If Harper comes back in March with a Budget, Canadians need to ask serious questions about effect of the mistakes he has made in the past, and about the issues he is avoiding today. We should question overly optimistic assumptions about revenue growth, or assumptions that ignore the effect of interest rate increases on interest expense.

...and adding more noise to the statements from the PBO that we are in a structural deficit situation, not merely cyclical, would be good too. Something's gotta give, and there is a real lack of candour from Ottawa. Of course, as the poster above says, it will provide an opportunity to slash spending on the neocon's favourite targets -- education, health care etc etc. But it is shocking to see all the sacrifices of the 90's and the vast surpluses of the 00's go out the window in the space of, what, a year? Fiscal leadership like that is rare, indeed.

"The reason the economics profession doesn't opine at length about public policy is that they really aren't ASKED."

Oh, sure they are. If you take Jim Stanford, that blonde woman and that guy from the Fraser Institute as a proxy for the economics profession.

I think it's more a matter of economists being fairly quiet. This kind of stuff came up in our econ classes and it was obvious from the inside that the profession was against the GST cut. But it's maybe not as obvious to the outside because economists aren't the type to kick and scream and grab headlines. I don't think that's necessarily a bad thing.

Of course, that begs the question of *why* economists are fairly quiet.

My guess: Where's the benefit in making a fuss? And who wants to go to the hassle of going on TV and being used like a circus clown? I can see it now: "Next on Global! Economists vs. Joe the Plumber: the GST smackdown. Who's right?".

Yep. To an alarming extent, public debate is dominated by people whose job it is to dominate public debate.

I think that it would be easy for economistics to come up with the following high level analysis that gets at the real issues with the current state of federal finances:

Everyone expects the federal deficit for the year ending March 31, 2010 to be a disaster. I question why analysts would fail to make this point in January and February based on simple information which is publicly available? There is no need for Canadians to passively wait for the March 31st numbers, which will not be available until late May. Use the Fiscal Monitor for October (which is avaiable now), to make the following points:

1) Harper increased spending to about $230B over 2008/9. He foolishly assumed that tax revenues could not decline. GDP dropped 3% in 2009, but tax revenues dropped 12% in 2009. This 12% decline is about $25B, and this is the so-called structural deficit. You do not have to analyse mountains of data to see the cause of the $25B "structural" deficit - Harper ramped up spending in 2007 and 2008, and had no clue about the coming decline in tax revenues. Bad planning that has absolutely nothing to do with the stimulus package.

2) Demonstrate the lack of foresight involved in the GST reduction. A 5% GST brings in $25-30B of revenue annually, a 7% GST would have brought in $35-42B in revenue. Harper's weak decision results in $10-12B of foregone revenue each year.

3) In 2009, Flaherty is asserting in future years revenues will grow at the same projected pace as GDP (3%, plus 2% for inflation) and that revenues will recover. Flaherty's projections are overly simplistic, and are not materializing. Someone needs to demonstrate this to Canadians before March, and ask Flaherty the tough questions about the revenue shortfall.

4) Flaherty "warns" Canadians about the effect of interest rate increases on variable mortgages. What about the effect of interest rate changes on servicing the public debt? At record low rates, interest expense is about $30B annually; a modest increase in rates will cost another $10-20B per year. This needs to be made clear before March.

I think a lot of our profession - academic economists - don't see the value in it if its not in a peer reviewed journal. In fact I get the impression that those who comment on things regularly are viewed as no longer being serious economists - the way Krugman gets talked about in some quarters for example.

One of the saddest scenes I've ever witnessed was a few years back at the CEA meetings at Concordia I think. There was a big reception and as part of it Richard Lipsey was talking, ostensibly about a book he'd just done, but his theme was mostly about the need to be a presence in public policy debates. Except for a few of those in the immediate vicinity, most went quickly back to drinking eating and talking, ignoring him as he spoke. Not a proud moment for the profession.

When economists publicly say what the believe they risk being not just wrong, but embarrassingly wrong. This isn't always a problem, (look at Bernanke's numerous incorrect public statements) but for someone without Bernanke's muscle, it can be very bad.

Sure. But it doesn't seem to stop non-economists from taking that risk.

My impression of why many non-economists are so willing to give their opinion on economic matters is that they don't view the possibility of their being wrong as a significant risk.

Their is selection bias going on, the people making the statements tend to be absolutely sure of the correctness of what they're saying and generally the more wrong is the statement the more sure they are of it's correctness. This explains why they don't hesitate to state the view publicly, those that know enough to be unsure are those that know something about economics, like economists.

Just Visiting, subsidizing coal, LNG or tar sands is about the most evil thing a human being can do right now, even if your employer cheerleads Neoconning.
I suspect our MSM along with their big brothers down south will be judged along with Hitler, Mao (literally via forced famines) and Stalin in the history books. I can't imagine your/their/our fates if their is an afterlife.

...in terms of the finance ROI, ignoring the climate effects of AGW, I'm guessing this project is based on a 4x growth of oil sands in the near future, which is delusional whether AB or their customers constrain dirty energy growth. If it is for growing agri-demand (a melted ice cap opens up more northern prairie marginal soil for farming, no? One day Liberals will commission this adult study that would benefit AB against their own wishes), probably high ROI. I don't really care for this debate though, we got a pointless $10B auto subsidy instead of attracting Toyota and Honda branch plants and instead of utterly dominating the electric car market gorwing Zenn 100x. If we had this debate I'd suggest subsidizing Honda Palliative Robotics plants in AB or maybe in elderly (hostile to immigration) Que. But it was forced through using GWB and Obama's finance bailouts as a cover and they used their flagging USD domination of the world's economy to further subsidize their (not ours BTW) diabetic rich.

So the real question is why the Aspers and CTV Neocons don't want to debate just what to subsidize. I'd guess this shock doctrination will be the Canadian norm given our Flaherty corporate tax rates. Enjoy your financial services and oil sands, all. Our healthcare stocks are 0.4% of S&P market cap while energy and finance are 75%; pensioners underfunding their own healthcare is a hilarious distraction from making AGW worse.

....and on this topic, Harper/J.Flaherty extended a $100B credit line to Canadian Banks. Laurentian Bank and probably all others, exclude Indian Reserve postal codes from loans. IDK if this is good or bad short-term banking, maybe IR property rights laws make mortgages a bad risk or something. But that taxpayer-subsidized insurance would cost maybe $5B privately, enough to maybe make it the 2nd biggest bailout ever. Just imagine if the correct economic decision (constrains wage inflation bubbles and GHGs) were made to exclude oil sands towns from the Flaharpinsurance. Imagine the self righteous outrage. At the very least from a Human Rights perspective since feds pay the social costs of poverty, you'd expect any fed bank bailouts not to be so bank industry hostile to the poor. Why wouldn't you at least advise them how to avoid exposure to bankster investments so they don't use the money to buy up Moody's or whatever?! Harpocrit rich Canadians. I wish I was Scandinavian minus the neutral zone trap (thick bluelines fix this).

Saw an interesting debate on The Agenda last night The Limits of Economics

Not sure if Diane Francis would have been your choice for representing the Canadian perspective. Video not yet posted.

http://www.tvo.org/cfmx/tvoorg/theagenda/index.cfm?page_id=7&bpn=779686&ts=2010-01-06%2020:00:00.0

Should governments encourage more research on public policy? I remember as a student reading lots of economic policy work commissioned via the Ontario Economic Council (deceased), Economic Council of Canada (defunct) and the MacDonald Commission.

The usual suspects?

If the House was not prorogued, the Commons finance committee, which is led by Conservative James Rajotte, would be able to hold the pre-budget consultations it usually does.

True, economists and special interest groups will still be able to make their pitches behind closed doors at the Finance Department. But a government truly interested in facing up to the massive mountain of debt ahead, ought to be thinking about building a public consensus on how to get the country's books in order.

A government that is serious about dealing with the problem should be encouraging public hearings where respected economists like Don Drummond, Dale Orr, Bill Robson, Mike McCracken and Jim Stanford would spell out in detail the scope of the problems and the choices that will have to be made to deal with them.

http://www.cbc.ca/canada/story/2010/01/07/f-vp-newman.html

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