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I personally would be delighted if there was a rigid certification process for Economists with MainCerc and ProfDev requirements. I looked at the requirements for the Royal Statistical Society and found myself sorely lacking! Unfortunately I fear the economics faculty as a whole over North America are too idealogical boxed into "left" or "right" wing boxes that preclude intelligent and mutual respect for each others abilities. How would agreement be reached on who is credible to construct the definition of an economist?

As for rent seeking, the best way to make a lot of money as an "economist" is to have education in another field (e.g. engineering, medicine, forestry, accounting, law), acquire credibility in that field, and then call yourself an economist.

"Should a licensed economist, for example, have to agree that free trade is a good thing, or simply be able to set out arguments for and against free trade? Defining what economists must know is, in essence, defining our discipline."

In my opinion, all properly constructed economic theory is correct given a set of assumptions. An economist should be able to describe the theory, define the assumptions that support the theory, and then test reality to assess whether or not the assumptions hold. You don't need to be an economist to propose policy or analyze an environment where the markets work as taught in Econ 101.

We should definitely be licensed so we could shut down ludicrous places like the New School and GMU.

Yanstop - Should this Keynes v. Hayek video or the 2.8 million hit one here earn GMU a reprieve? Or does this just strengthen your case?

Generally speaking, certification seems far less problematic than licensing when it comes to restricting supply and raising prices. Competing brand names seem to work fairly well as a device for disciplining quality in the product market: could rival certification authorities fulfill the same role in the market for professional services, while avoiding most of the drawback of government-enforced licensing?

Anon - just to clarify - accountants, doctors, etc are generally self-regulating professions - governments give force to requirements set by the professional bodies themselves. I think the phrase "government-enforced licensing" might confuse some readers.

Business schools are certified by three competing accreditation agencies (hence "triple certified" business schools). The idea of semi-outside-the-profession accreditation is interesting because side steps one of the key barriers to getting accreditation off the ground: economists in top-ranked schools/with outstanding publication records have little interest in creating a process that serves to establish the credibility of economists outside of that elite circle.

Licensing is useful for overcoming a problem of asymmetric information, where quality is hard for the buyer to observe. But the buyers of economists' services (mainly universities, government agencies, and consulting firms) are sophisticated buyers who are able to judge the suitability of candidates much better than a standardized exam. Moreover, these candidates have already been certified as PhDs by a graduate program in economics.

What could you test on a licensure exam that would add to these sophisticated buyers' information sets that they don't already know? They know that the candidate has a PhD, they generally hear an interview or presentation, they have access to academic records, letters of recommendation, the candidate's CV and JMP. What would a licensure exam add?

I can't speak for the accountants, but the law societies' exams are not particularly effective methods of accreditation. Unlike American bar exams (at least in places like New York), which are notoriously rigorous, Ontario's admissions exam is, barely, a test of one's ability to read english (or french, as the case may be) and to manipulate an HB pencil (and I say barely, because it is often so typo-ridden that it may actually be harder to write if you're literate). In fact, the failure rate for all students on the Ontario bar exam is widely rumoured to be approximately the same as the failure rate on the New York bar exam FOR YALE LAW STUDENTS (which either suggests that Ontario's law students are brilliant(or that Yale students are not), or that the Ontario bar exam isn't exactly rigorous).

Which leads me to the third method of accreditation, namely apprenticeship (or a variation thereof). For lawyers in Ontario, the "weeding-out" process is partly done by accreditation of law schools (i.e., faculty level accreditation) and partly by requiring would-be lawyers to work as articling students for 10 months under the supervision of an experienced lawyer (in contrast to our American cousins, where passing the bar is the litmus test). Maybe to be an "accredited" economist, you should have to work under an experienced economist for a period of time. I gather there's a similar requirement to be a "Professional" engineer in Ontario. This would be a low barrier to those who have obtained advanced degrees in Economist (since, time spent pursuing a PHD in economics would count towards that), but might weed out some of the more obvious cranks (though, they'll just call themselves "political economists" and avoid the whole regime). It would prevent my friend, the sociologist, from holding herself out as an economist with the federal government (which, in fairness, she only because that is the title of her position - although she did take econ 101, she doesn't pretend to be an economist).

The internship period to get your P.Eng is 2-4 years depending on jurisdiction, then you have to pass an exam.

The P.Eng is also a dead letter in many fields of engineering, Electrical most of all.

First, for the last 15 years at least Citizenship & Immigration brought in many engineers from other countries to help our labour market. Except the provincial engineering societies wouldn't recognize their degrees or credentials. Many simply ignored the regulations and worked in their field anyway. In a field like avionics, the practice of "checking" whereby a senior engineer, usually of management rank "inspects" and then stamps the work of an unlicensed junior is rife. This practice is illegal but the market accepts it anyway. Money talks.

The PEO, the engineering regulator in Ontario earned a reputation as being anti-immigrant.

BTW the exam is an ethics exam. Actual technical knowledge is certified by your accredited degree.

Determinant, Patrick - I've changed the post a bit to clarify that part about engineering certification. Yes, articling/on the job training is important, I'm just more aware of the "we have to have XXX in order to maintain our accreditation" arguments that are made during university-wide battles for resources!

The immigration issue is a really important one. Jon says certification is unnecessary because people "know the candidate has a PhD". But if an economics job market candidate's PhD is from any university outside of Europe or North America, with perhaps one or two exceptions, that person doesn't have a snowball's hope in hell of getting on a short list. Yes, that's changing, as Asian universities become more and more internationally recognized, but slowly. What do we say to someone with a Phd in Economics from Peking U who is looking to work as an economist in this country?

Terry McGarty reacts here.

Terry, thanks for the response, for your kind words, and for quoting me in context! I agree with most of what you say. On your substantive point:

"it may create a chilling effect on those who may desire to comment and contribute" - Yup, that's what supply restrictions are all about! Though see the points raised in the comments above - right now we judge economists on the basis of reputation - their own reputation and the reputation of their educational institutions - which itself creates significant barriers to entry.

I understand that the effects of licensing--to the very limited extent that they can be predicted--would vary from profession to profession, but working in health care and having read analyses of licensing in that industry, I have a very negative reaction to the idea.

First, I have the usual objections, about the failure of self-regulation, the whole idea of state-enforced labor monopolies, the rent-seeking, etc.

I also think that the asymmetry that supporters intend to right is simply shifted elsewhere. The general public tend to support licensing because they interpret it as a rigorous proof of competence, much like they tend to support stimulus packages, minimum wages, and rent controls. But as a result they develop excessive trust and an unnecessary horror of unlicensed activities. Yet the reverse tends to happen: sub-standard and even incompetent individuals are much more difficult to get rid of, and employers are more likely to wait until performance becomes absolutely unacceptable before taking action. This is certainly the case with doctors, but also many other health care professions. Most doctors, like any professionals, are competent and conscientious, but their incompetent colleagues are not easily dislodged, and likewise with nurses.

The complaints process for many such professions is also unhelpful. Although every college/body/association has a "transparent" process, the fact that you cannot get action simply by calling up that person's boss and complaining raises the barrier to sharing important information about substandard conduct. If you are very ill-treated by a grocery store clerk, you could call up her boss and complain and at least expect a reply. However if instead you find out that her boss, despite being her boss, actually has no say in the matter, and that instead you must make a written complaint to the Ontario College of Alimentary Transactionists, whose attorney will reply to you within 90 days, well.... I have talked to people who chair disciplinary committees, and the answer I usually get is that their hands are tied by the law. They why do they exist, and how can they claim to be protecting the public? Ironically, because of the high barriers, many colleges are flooded with frivolous complaints by chronic malcontents who have little better to do, which only increases any college's aversion to a more accessible complaints process.

Frances Woolley, the fact that licensing standards are set by professional organizations is a problem in itself, since it can create a de-facto cartelization device.

Reputation does create barriers to entry in relatively underserved markets, but this seems to be most relevant as a fairness/equity concern. Even if there are fewer candidates from Asian universities and consumers might not find it worth the effort to tease out indicators of quality for such candidates, we still want high-quality candidates to be recognized in some way, regardless of their national origin. So yes, implementing some kind of reliable certification would obviously be helpful here.

The classic Canadian case that gets at some of the issues mentioned in the comments above is long-running dispute between a group of Indo-Canadian veterinarians and the College of Veterinary Medicine of British Columbia, see, e.g. http://bcvetsforjustice.ca/. The case revolves around an English-proficiency exam which the Indo-Canadian vets allege is de-facto discrimination - the Indian vets allege that the College is attempting to stop them from practicing because they undercut the College's fee schedule, charging far less than other vets.

There is a potential natural experiment occurring in Manitoba, where social workers were recently brought into licensing legislation. Previously employers required a social work degree or equivalent, but now they must hire monopoly-licensed clinicians, and likewise unlicensed clinicians with degrees cannot use the name. It would be interesting to see if any data could be collected on complaints, demonstrated competence, dismissals, etc., as well as analysis of wages and labor market dynamics.

My initial impression is that there is nothing for economists to gain by having a licensing regime. There are plenty of students that study economics at the undergraduate level in university, but only a fraction of them will go on to get actual work as economists in industry, government or academia. The rest will go on to work in other fields. By comparison, most students who choose to study accounting, law or medicine intend to become practicing accountants, lawyers and doctors respectively.

In general, I think the gateway to claiming to be an economist is actually a masters degree (in Canada). Graduate economics schools already screen incoming applicants extensively. So, a graduate degree in economics may already be enough to signal superior knowledge and skill in economics. I think there is already a salary premium being earned by people with such accreditation anyways (over their peers with only undergraduate training).

"Done well, accreditation could raise the quality of economic debate. How many times have you read a newspaper, or turned on the TV, and heard someone claiming to be an economist who demonstrated absolutely no knowledge of basic economic principles? Accreditation could - perhaps - flush out these charlatans."

Just possessing a degree in the subject might be the place to start. I used to be a high school math teacher and returned to school in 2005 and earned a BA, MA and soon a PhD in economics. When I first started my studies I often spent my free time reading articles and blog postings by "economists". Pretty soon I became aware that the vast majority of the people described as "economists" didn't even understand the basic concepts taken for granted as part of a freshman course in the subject. Upon investigating their credentials I discovered most of them had no degrees in economics and many had never even taken econ 100.

Case in point: John Tamny. John Tamny is "Senior Economist" at H.C. Wainwright, editor of RealClearMarkets (RCM) & Forbes Opinions, and executive director of the Supply Side Institute. Mr. Tamny frequently writes about tax, trade, monetary policy and other macroeconomic issues for a variety of publications including the Wall Street Journal, Investor’s Business Daily, National Review and the Washington Times. He’s also a frequent guest on CNBC’s Kudlow & Co. along with the Fox Business Network.

But John Tamny has no degrees in economics, and to my knowledge has never formally studied macroeconomics, the field in which he professes expertise. He has a BA in government and an MBA specializing in finance, for which he might of been required to take an introductory course in microeconomics. ("No I'm not a neurosurgeon, but I did stay at a Holiday Inn last night.")

On the other hand it is possible to find people without degrees in economics who yet have a comprehension of the subject, even of macroeconomics, as good or better than some PhDs. Case in point: Bruce Bartlett. Bruce Bartlett may very well know more about US fiscal policy issues than almost anyone alive. And yet Mr. Bartlett only has a BA in history.

Still the point remains that the way our media circus runs these days the only thing it takes to be an economist is to just call yourself one. And, in my opinion, 99.99% of these clowns are giving those of us who bothered to earn a degree in the field, and consequently take econ 100 (Kocherlakota excepted), a bad name.

Robillard: "In general, I think the gateway to claiming to be an economist is actually a masters degree (in Canada). Graduate economics schools already screen incoming applicants extensively."

Actually, I think the experience Bob Smith describes, with a person with a BA in Sociology in an Economics job description, is much more common (around Ottawa anyways) than you might think. The Department of Finance 2009 recruiting campaign said: "1. Field of study: Candidates must have or be working toward a Master's degree in economics, international studies, public administration/policy, or finance from a recognized university. Candidates must be in a position to complete their degree by December 2011. A 75% cumulative grade point average in your last completed degree is required." The Department of Finance and other departments hire lots of economic analysts with degrees in international studies, public admin - who probably have intermediate-level micro/macro.

Instead of just guessing, I just googled the course requirements at the University of Texas at Austin and Vanderbilt University where Mr. Tamny completed his BA in government and MBA in finance respectively. The BA in government at UT Austin has no economics requirement and the MBA in finance has a managerial economics requirement that takes half of a semester to complete (2 credit hours).

Managerial economics is a branch of economics that applies microeconomic analysis to decision methods of businesses or other management units. In short, my suspicions were confirmed.

And yet he is a "Senior Economist" who mainly writes about macroeconomics.

name dropping?

"For example, if funding sources were disclosed, it might be easier for policy makers to distinguish between independent academic research and partisan rhetoric, and put more weight on the former."

That's possible, but I think there are at least a couple of factors that would weaken the effectiveness of that policy. For one thing, (partisan) policy makers might not really care about whether research is independent. Another problem is that "independent academic research" can be just as partisan as research funded by, say, the Koch brothers. The money issue CAN skew things, but we all skew things pretty well without being paid. That's what I think.

Full disclosure: I was not promised any money in exchange for posting this.

Blikktheterrible: "Another problem is that "independent academic research" can be just as partisan as research funded by, say, the Koch brothers."

Especially when the Koch brothers (or their representatives) vet university hiring decisions.

Years ago, ASDEQ (Association des économistes québécois) tried to have a professional order recognized by the Québec government. The goal was to have a legally binding Code of ethics that would protect economists from pressure by their employers. The answer from the Conseil des Professions was that professional orders were for the independantly-working. Even though most Order-regulated health professional, such as nurses , work in an institutional setting while most lawyers are either junior in non-partner status or in legal department. Of course, they understood that most economists work in government or banks where you are expected to be subject to pressure, the very reason we wanted the protection enjoyed by engineers or biologists.
In Québec, masters are of course desirable but ASDEQ ( as close to a professional body we are likely to have) requires a bachelor degree with at least one course in advanced Macro and Micro. A requirement waived, "out of courtesy for the dignity of the office", for Prime Minister Robert Bourassa, who always claimed to be an economist but had lost his diploma ( being too busy to ask for a new transcript we presume).

Lack of a degree? One of the columnist in Montréal's La Presse , recently retired, had a grade 10 education and proudly advertised himself as an "autodidacte", showing the obvious limits of teaching yourself what you don't know.

Anyway, most damages comes not from "unlicensed" economist but from the dishonest ones.
A few weeks ago, Nathalie El-Grably, the "economics columnist" for the Québecor group, wrote a column where she claimed that the lower unemployment rate in Texas compared to New York, plus the fact that Texas was running a budget surplus while NY was in a deficit "proved" that union cause economic catastrophe. Problem was, apart from the non sequitur, that the New York numbers were from 2010 while the Texas ones were from 2007. (And Texas now has even bigger budgetary problems than California).
She is an Austrian and ,needless to say, a member of the Institut Économique de Montréal, Québec sad clone of the Fraser. IEM has granted scholar status to, of all people, Maxime Bernier.Fiction must be credible but reality merely is...

Odd hour to comment but ASDEQ is holding its annual meeting in Gatineau and while the straight types from Federal Finance have retired by 9 out of habit, the rest of the bunch partyied as hard as possible. Still one day to go, so feel free to cross the river and join the fun at the Lac-Leamy Hilton...

A group of hospital adminstrators were trying to make sense of all their administrative data but the numbers were making them dizzy. They decided to hire a Data Analyst so they could make "Data Driven Decisions" but they weren't sure who so they interviewed a mathematician, an engineer, and an economist.
During the interview, they asked the mathematician "What is 1+1?"
"Are you sure?"
"Absolutely. Exactly 2."

To the engineer, they asked "What is 1+1?"
"Are you sure?"
"Well within acceptable margins of error; much less than a 1 in 100,000 year event that 1+1 is not 2. So yes, I am sure 1+1=2."

They brought in the economist, and asked "What is 1+1?" The economist got up, closed the door, drew the blinds, leaned across the table and whispered "What do you want it to equal?"

I concede that the hiring of Professional Economists in macro analysis and academia do not need a regulating agency other than the sheepskin. However, I think the potential for economists to make the world a better place is severely limited by a lack of clarity in how our skill set can help real-world problems outside of government and universities.

I imagine Shangwen has a lot of stories of senior executives making decisions about healthcare that appear baffling to economists.

Just a note re the licensing of lawyers. Of those who seek admission to Canadian law societies, approximately 97% gain entry. In other words, the bar examinations and articling requirement do not themselves create a meaningful barrier to entry. At the current time Canadian law schools are *not* accredited. They will be by 2015, but the accreditation requirement being imposed is relatively soft compared to that in other professions. The barrier to entry is, simply, the absence of law school places. Since 1982 there has been no meaningful expansion in the number of law school places in Canada (this year there will be the first new law school since Moncton opened in the late 1970s/early 1980s). Every year hundreds of Canadians leave Canada to seek legal training elsewhere. Those graduates do face meaningful barriers to entry, however, in the form of the national accreditation process, whose examinations are harder and do fail people.

With respect to economists, the issue that makes something like law inapt is the international nature of it. We set our licensing requirements for law provincially (although there is national mobility) and can justify barriers on the basis of local differences. Economics is by its nature an international field. That means that your licensing/accreditation cannot be legally imposed, and has to involve in essence some sort of branding/voluntary participation model. That is likely to be led by universities, but the non-faculty status of most economics departments (i.e., that they are embedded in a faculty of arts) makes the sort of bus-school accreditation process unlikely.

Frances and Mark Sadowski, I understand where you are coming from, and your comments remind me of many discussions I've had with professionals about introducing or expanding licensing. The problem is that the perspective of employers and users of professional services gets left behind. I definitely understand that hiring someone with a sociology degree and getting them to do an analysis of interest rates or a trade agreement is a bad, bad idea, but most employers would recognize that. The problem with licensing is that it frequently imposes standards from the high end of the profession--likely a PhD in the case of economists--even though not all employers needing economic analysis would require that level of skill.

A further problem is that with the licensing of professions you also get the licensing of their activities. What would that be for economists? Would a tax lawyer face a fine for arguing that a certain tax measure was anti-competitive? Would an MBA be legally restricted from publishing an inflation estimate? I am not assuming that these individuals are necessarily qualified--in most real-world cases--from making competent arguments in those areas. I just don't know how you could clearly draw a circle around some particular action and call it a "licensed economic act".

Peter McClung: I've heard that joke several times before, though instead of the third guy being an economist, it was an accountant.

Any thoughts on what should happen to someone caught practicing economics without a license?

So who do you trust more, your accountant (Sheila Fraser) or your economist (Stephen Harper)?

Thanks for all of these excellent, thoughtful comments.

Shangwen: "I just don't know how you could clearly draw a circle around some particular action and call it a "licensed economic act"." Yup. This gets back to the idea that licensing economics would of necessity involve defining, and thus delimiting the scope of, economics. I wouldn't like that.

At the same time, what does the fact that it is so hard for economists to identify a key set of things that they do, that they must know, say about the state of the discipline?

Alice - excellent points about the international dimension, and the difference between department and faculty status.

Jacques René - once again I feel like I miss out - really miss out - by being so bad at French. Those ASDEQ conferences always sound like so much fun...

Livio: "Any thoughts on what should happen to someone caught practicing economics without a license?"

What else? 500 hours of mandatory economics training (including 100 hours of econometrics). If it doesn't discourage them from doing it again (and it probably would) at least it ensures that they'll be more knowledgeable.

I'm going to reach across the aisle and offer some suggestions to those who would support licensing and enjoy the additional rents it would capture. Here are some licensed economic acts by Registered Economists (REs) you can get the government to enforce:

- All interest rates, including interest rates on mortgages, to be available only by prescription. To renew your mortgage, there is also a $30 prescription renewal fee payable to your RE;
- Resist regulation of all the freebies, seafood dinners, and "educational" cruises offered by Big Interest to REs;
- Every episode of Til Debt Do Us Part to begin with the stern warning, "This program depicts personal financial management. Do not engage in any adjustment to your spending habits without first speaking to your Economist".

For all those who break the rule, I endorse Bob Smith's proposed remedy.

I'm a licenced professional engineer in the provinces of Quebec and Ontario. You cannot separate the issue of professional licensing from the question of professional liability. For example, in Quebec certain acts such as the preparation of plans and specifications of constructions are reserved by law to engineers or architects. If there is a fault with the work discovered within 5 years of completion, the architect or engineer is presumed to be responsible and is personally liable for damages. There are probably similar laws concerning other professions. It is for this reason that professional associations generally require that their members hold profesionnal liability insurance, and being insured is a condition of licensing.

If you want a professional association for economists, you should ask yourselves what activities would be reserved by law to professional economists, and what would be their personnal liability for professional errors?

Bob Smith and Shangwen: econmetrics would be banned in the U.S. under the 8th amendment against cruel and unusual punishment

As Alex Plante said,the professional liability and definitions of acts are primordial.
But there are two distinct problems : the restrictions about calling oneself an RE and the restrictions on certains reserved practice.
If you pass law school you can call yourself a lawyer ( unbared lawyer? predisbared?) while an economics degree doesn't enable you to call yourself a lawyer. Lawyer is a "titre réservé" ( restricted title? I don't know the exact legal expression in english). But you must be a member of the Bar to argue a case in court or sign a legal opinion. It is "une pratique réservée" ( restricted practice?)
It is almost impossible to argue that only holder of a diploma ( Ph.D masters, or a Québec Bachelor almost equivalent to a U.S. masters) should express an opinion. Economics is like politics and hockey.And if a commercial customer is willing to get shoddy work from an accountant say, natural selection will probably weed out those maljudging entrepreneurs... However, what we should at least try is to prevent people calling themselves something they are not. ( It won't solve the intentionnal dishonesty problem though.)
After the Office ( not Conseil, that's what an economist party can do to your mind) des Professions refused our request for a professionnal order, we tried another tack : a trademark. The reasoning was that at least we could brand a product. There would be no legally binding professionnal liability, though some of us thought about a kind of garanty for forecast...Anyway, the Ministère des Institutions Financières et des Compagnies ( who was in charge of registering trademarks) told us our " product" could not be defined strictly enough to qualify. You need strict boundaries so as to be able to enforce your right about TM infringement. So that route was closed too.
Still, there were discussions today about the subject. Hope spring eternal even in the Outaouais humidity...
Frances : we always have anglo participants, some had been regulars for years. We always have english activities. Keynote speaker this year was Dale Jorgenson ( our third U.S. Nobelist in a row) and there was a presentation by Randolph Preston McAfee, chief economist at Yahoo!, on auction mechanism for advertising placement on search engines.
However , most of the program is geared at what we call "praticiens",( practicing? practical? applied? economists) guys ( and a fast increasing girls contingent) working in the civil service, banks or consultancy and cegep professors.
The truly academic researchers go to the Société Canadienne de Science Économiques ( Canadienne in the old sense of French Canadians as in Montréal Canadiens). There many members from McGill and Concordia. John McCallum was once president while he was at McGill.
The english "Happy hour" is a "5 à 7" in french. We don't translate, we multiply. Yesterday's 5 à 7 was a six service tasting-pairing of cheeses and canapés with wine,beer,ice cider and tea. The wait staff didn't want to be caught-empty-bottled, so by 9 tickets were no longer required and there was a raid on organic ice-cider...
Next year ASDEQ is in Montréal ( we rotate among Gatineau, Montréal and Québec City, the three main centers of activity for franco economists).
So come ya'll, learn and party, party and learn, learn to party if need be, but come...

I'm feeling a bit guilty about my Accountant / Economist comparison. A better Economist for comparison would be Mark Carney but there is also the currently infamous Dominique Strauss-Kahn.

Also, given "it is so hard for economists to identify a key set of things that they do [and] that they must know" does this really speak to the maturity of the discipline or is it, like medicine, a field that prescribes a course of action that is specifically dependent on an accurate diagnosis?

At the very least, why is it so difficult to define what is required for an accurate diagnosis? (see the thread on "How not to evaluate immigration policy" for example.)


Interesting, but I think you went to the wrong place. Trademarks, copyrights and patents are exclusive federal matters. For instance the word "engineer" is trademarked to the Canadian Council of Professional Engineers on behalf of provincial regulators.

Your effort would have been overturned in a flash by the courts. See the case of Brick's Fine Furniture in Winnipeg and The Brick, the furniture superstore of oh-so-many discounts.

Frances, when you refer to accreditation for economists, are you imagining that a degree in economics would be a pre-requisite for accreditation? It seems to me much more interesting if your answer were no.

You're right, of course. I may have a rather charming british accent but my legal english is not on par with my economics one.

So: after incorporating the Association, we went to the Ministère of blabla for a " raison commerciale" ( a registered commercial name, the "reg'd" or "enr" you sometimes see after a business name). The guys there knew our ultimate goal ( it had been making the bureaucratic round for some time) and explained why the Feds wouldn't give us a TM.
Hope it clarifies matters.

For those in Ottawa, enjoy the Festival last week-end.It was gorgeous yesterday, apart from the construction mayhem in front of the Rideau Center...

I keep wondering what you would do about Macro and those pesky Austrians. They never go away. I like some of their models though I disagree completely with their conclusions. I even tweaked one so that it was completely Keynesian-compliant.

Drat, did I just admit to practising unlicensed economics?

Unwarranted licensing is a modern plague. It's the experts' way of protecting their turf and controlling apostates.

Unless there is a very strong public interest in it (and I don't see one here), the answer is a resounding NO.

Strange how a field normally so supportive of free markets wants to implement its own little monopoly.

rabbit: as Keynes put it we are slaves to dead economists. But through the actions of the living ones.There is a strong protection of the public argument. It is simply very difficult to define correctly and ,unlike bad medecine, people don't immediately die in an easily-linked manner.

Determinant:The problems with Austrians is that they come,somehow,from otherwhise reputable schools. You can't identify them, en masse, as quacks, as you can identify identify someone from a Southern Bible school. I don't even know where they pick it up,as most economics dept. have long been light on history of thought. They even , in ordinary life, more or less function normally. Though most seems to find a refuge as the token weirdo in some serious place or take refuge in a pseudo-think thank like the IÉdM.
One can have a wrong model but gets the right results. You can have the wrong science but a right technology. Ancient Gauls put a red-hot sword through a prisonner so as to transfer his courage into the steel.
Today the technique is known as high nitrogen steel alloying.No human sacrifice but still good steel.


I always had the highest regard for you but squashing a Hayek triangle into an IS-LM curves takes the game to a whole new level. I might put my king down on the chessboard.

Why thank you Jacques. I understand the Austrians now have stronghold at Auburn University in Alabama. They call it the Mises Institute.

I have a little article outlining what I did. Perhaps Nick will see fit to publish it. I lifted Roger Garrison's graphical model from his book "Time and Money". In this he links a Hayekian Triangle to a Production Possibilities Frontier and then to a Loanable Funds Market graph. Which is fine. So I came along and drew a money supply limit around around his loanable funds market. It defines how much money the economy has to use. Then I stood back and thought a bit.

I posited that there are TWO separate and distinct kinds of recessions, not one. This is my radical theoretical point and I can only make it by having a separate place for money in the model.

The first kind of recession is a supply shock. The money supply stays the same but the Production Possibilities Frontier contracts. This is what happened in the 1970's. You get reduced consumption, unemployment and inflation as you spread more money over a smaller production capacity. The exit solution is reinvestment and savings to re-expand the economy's productive capacity. However, crucially, there is no output gap, in fact there is a negative one.

The second kind of recession is a money shock. After listening to Nick constantly going on about money here on this blog, I said that in my model, the economy is monetary. All transactions pass through the money market. Further, my model has confidence-based money. Money is supplied by institutions that make credit decisions, that is my model's money supply is provided by banks and other financial institutions. If there is a credit contraction due to an information shock or some other form of panic, the money supply will contract. The economy will settle into a lower level of investment and consumption with a positive output gap. This isn't a supply problem, it's a demand problem due to sub-optimal monetary conditions.

The exit solution in this case is money supply repair and expansion, government-led investment, use of the Multiplier, etc. This is Keynes world, it was what he was attempting to describe in the General Theory. It was the kind of problem we had in the 1930's and the same kind of problem we have today.

I don't use IS/LM explicitly but I suppose you could use it to characterize the stance of the money market in my model.

Crucially my model can distinguish with certainty the economic problems of the 1930's and today from the economic problems of the 1970's. I can say when stagflation will be a problem, and when it won't be a problem and we should use the fiscal levers without hesitation.

Plus the theory is graphical. You can even make an animation of it. On the downside it's a pain to describe and make all those graphs. Hayek had the same problem.

I should also state I am a complete and utter amateur. I have read the General Theory, I like following economics, but I have never studied it formally. I have a Bachelor of Electrical Engineering and frankly too much time on my hands. I have never taken an economics class in my life. I have been clear on this blog that I am a member of the Maple Leaf Peanut Gallery and nothing more.

Other people have raised a similar concern but with more words: how do you create licensing and/or accreditation for what are effectively a set of political claims?

I thought precisely the same thing, Mandos. Much as some economists hate it, I feel you can never separate politics from economics.

The fact that some see licensing economists as a way to combat the Austrian school of economics shows why licensing is such an appallingly bad idea.

Determinant: I always get my students to undrestand the essential difference between acoconut ( real) and a money economy. But I would never introduce them to Austrianism.
Rabbit: Unlike the alphabet-soup leftists of the 70's (remember the PCC,PCQ,PCO, PC(m-l), PCC-m)? against which we fought in the student associations of the day), we don't ever seem to be able to ridicule into oblivion thes bizarro who, for unexplained reasons, seems to ingratiate themselves so weell with the Chamber of Commerce crowd.
If the only result were to at least brand tha Austrians as untrustworthy weirdos, I might find it a compelling argument for licensing. CofC types don't like marginality. Licensing migth do the trick.

The thing with Austrians is that they may have nice models and interesting theories but they wear their politics on their sleeve and generally make no attempt to hide their agenda. I find a person has to be very sure of their own beliefs before they even take a look at the Austrians. A history course or three is a good idea.

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