Nothing really sexy about the dismal science but still relevant

My wife is my cultural guru; she actually takes on that role for a wider group but I get to "benefit" from it most. She bought her father the autobiography of Alan Greenspan, former Chairman of the US Federal Reserve, which is entitled The Age of Turbulence. As is typical over Christmas we gladly share presents over the period, so I read this book. Now, as a professional economist, I have commented frequently that my profession is perhaps one of the least interesting and most widely misunderstood. Say to someone that you are an economist and they invariably reply about "knowing about money..." "tell me what to do with my investments..." or something to do with accounting. Worse is if they hear "communist" and start laying into a supposed political position.

I have also commented many times that there is nothing vaguely interesting for the general public about what economists do or any of the great personalities in the profession. Economics is known as "the dismal science" not just for being a poor relative to mathematics and physics. As far as I could find, the only film of any note made about an economist was A Beautiful Mind (see web site), which built a drama around the life of John Nash, who was a mathematician/economist who won a Nobel Laureate but was of interest to Hollywood for being a paranoid schizophrenic. Nash, a Princeton graduate and Massachusetts Institute of Technology professor, developed a very important branch of study, game theory, but became more famous for his mental problems, and how he overcame these. In fact, I personally was glad that schizophrenia was demystified because my mother was at the time suffering from the same mental problems.

Names of famous economists are bandied about and many people are at least aware of some of their claims to fame: Adam Smith (see print above; the invisible hand), Thomas Malthus (limits to population growth), John Maynard Keynes (see left; modern macroeconomics and the influence of government spending), Milton Friedman (see right; free markets, importance of money and monetary policies, political freedom), and many more. We think we have a very influential role in economic developments, though it's often ironic to see how countries that have been led by economists or had very well trained economists in top financial positions have performed very poorly in economic terms: look at modern developments in Mexico, Argentina, Brazil, many African countries. Nash is reported to have said that he was better with numbers than with people. But we also have a pretty poor record in the numbers area on which we spend a lot of time and resources, especially forecasting. These two general failings can explain why economists struggle. So, whatever the profession may believe, for most people our record speaks against us.

However, let me try to salvage something for the profession. Going back to my Christmas reading, two comments struck me, and they both come near the end of the book. The first is that the Iraq war is "about oil" and America's dependence on it--for an avowed Republican that is a very bold remark, but is in keeping with a technician who has tried to deal with many inconvenient truths when dealing with politicians. The second, "Markets have become too huge, complex, and fast-moving to be subject to ... supervision and regulation" (page 489). Greenspan argues for letting the "invisible hand" of freely functioning markets work more to regulate themselves. This is very much in keeping with his long-held positions. Yet, I am convinced that most governments will not go this non-intervention way: to some degree it negates the notion of government.

My intention in this blog is not to become a political pundit, but I have a feeling that these two observations are going to be very important in the year ahead. Both are global issues and have huge implications at national level. Like it or not most countries will be struggling with the consequences of developments in the arenas of world oil markets and world financial markets, and neither can be regulated. Most of the world has to accept that it is merely spectating in these markets. So let's see how long politicians (including in the Caribbean) can continue to try to fool their electorates that what really matters is the state of local situations and not that oil is drifting around US$ 100 a barrel and that the US dollar, Euro, Pound sterling and Japanese yen are being traded at levels that impose financial "pain".

As I finish this post, while still in The Bahamas, I am listening to Voice of Barbados radio on the Internet. The song playing is a new calypso by Red Plastic Bag. It's called "Oil", and about "things that man will do for oil...would kill...get food...cry and die...". Now if it reaches a calypso then you know it's important.