2016년 8월 16일 화요일

[발췌: Ian McMaster] Three economists (2009)



출처: Business Spotlight Blog by Ian McMaster (11.02.2009)


There are three types of economists: those who can count and those who can't. That's an old joke, I know, but it's still one of my favourites.

At the moment, the most common criticism of economists is not that they can't count, but that they didn't see the financial crisis coming.

What is the point of having economists if they can tell you when the economy is likely to continue as it has in the recent past, but can't foresee dramatic changes (which is precisely when you want their advice)?

Such economists are about as much use as doctors who always say you will remain in the same state of health. The key difference is that, after your health changes, doctors usually know why. Economists, on the other hand, are notorious for their different interpretations of history.
Over the past ten years, two economists in particular have enhanced their reputation by forecasting the doom that was on the horizon.

The first Cassandra is Robert J. Shiller, the American professor of economics at Yale University. Shiller warned back in 2000 that the stock market was experiencing a bubble that would burst. He is also known for his (correct) pessimism about the US housing market.

The second prophet of doom is Nouriel Roubini, the Turkish-American professor of economics at the Stern School of Business at New York University. Roubini forecast a crash back in 2005. His pessimistic projections have led the media to dub him "Dr Doom".

My own favourite doomster also writes incisive analyses of the US economy — and has done so for many years. But, unlike Shiller and Roubini, he is British. He is also a former professional oboe player and is now 82.

When I was an economics student in the late 1970s, this doomster was the director of the Department of Applied Economics in Cambridge, England. Before that, he had worked for the British Treasury for 14 years. And he later became one of the Treasury's "six wise men", a panel of independent forecasters.

His name? Wynne Godley. On Friday, we'll look in more detail at Godley's economic analyses.

* * *

Words of Wisdom (13.02.2009)

Look at the following comments and guess when they were written:

"For more than a year now, a recession has been developing, and is clearly now accelerating. It began when life went out of the property market. The downturn has been compounded by an overdue reduction in net borrowing by households which is now reducing consumption."
"I think the seizing up of financial markets may well result in a collapse in lending in the US to the non-financial sector so large that it causes a recession deeper and more stubborn than any other for decades — and deeper than anyone else is expecting."

Difficult, I know. But go to the top of the class if you guessed January 1991 for the first comment (about Britain) and January 2008 for the second one.

The comments show how little things change, although what was called a "financial squeeze" in 1991 is now usually dubbed a "credit crunch".

Both quotes are from Wynne Godley, an 82-year-old British economist and former professional oboe player. Godley has been one of Britain's most insightful (and unconventional) economists over the past 40 years.

The first quote is from a fascinating collection of articles written by Godley between 1988 and 1992, and republished by the New Statesman magazine. The second is from the Financial Times new year's survey of economists for 2008.

Godley, seen as a permanent pessimist by some, has consistently warned about the dangers of unsustainable long-term trends, such as excessive borrowing by US consumers. His analyses have also emphasized the interplay of the different economic sectors (government, the private sector, foreign trade).

From the obvious statement that net borrowing by all economic sectors taken together must equal zero - for every borrower there must be a lender - Godley derives fascinating conclusions. For example, he explains the need for increased government deficits if there is a reduction in net borrowing by households and firms (as in 1991 and now).
At the end of 2007, in a paper called "The U.S. economy: Is there a way out of the woods?", Godley wrote: "We conclude that at some stage there will have to be a relaxation of fiscal policy large enough to add perhaps 2 per cent of GDP to the budget deficit."

How right he was.

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