A seriously startling assertion in the economics leader in The Observer today:
It seems it is still seen as radical to analyse the flows of money in the world as if much of it was stolen, and how that skews investors’ decisions. But it’s not radical: it’s a fact. Tax alleviation structures dominate company decisions, but are rarely debated by students. Some of the money will be drug money or gains from organised crime. But most of it will be money that avoided tax in the country where it was generated.
The avoidance of tax is, by very definition, obeying the law. And yet there we’ve the assertion that this is akin to theft. We seem to have a newspaper firmly rooted in reality here, don’t we?
Still, what does amuse is that we’ve a corollary of Muphry’s Law here. That any column complaining about economics or the teaching of it will contain bigger howlers than those being complained of.
Britain’s economics students are dangerously poorly educated
Hmm, well, yes.
Last year the chief economist at the Bank of England, Andy Haldane, gave a fear-inducing speech that warned of Armageddon in the jobs market. Robots threatened 15 million UK jobs, he said.
This dystopian picture of busy machines and queues of jobless Britons was replaced this month by a rosier view from PwC, which made the opposite claim: robots and artificial intelligence could create as many jobs as they destroy, which happens to be around 7 million.
Then the University of Oxford said 35% of UK jobs could be automated, while a 2017 McKinsey report warned 5% of UK jobs were highly automatable. The MIT Technology Review has identified at least 18 different predictions about automation.
This article is not about robots, AI or even the debate raging over the impact of Brexit. It’s about the detachment from history and real life – stemming from a disastrously narrow education – that allows economists to make such claims, and the damage that does to public debate about important matters.
A sensible historical view would suggest that we’ve been automating human labour for 250 years or so now. That job destruction is about 10% of the workforce each year, quits another 10%, job creation and job hiring amounting to 20%. Unemployment is only the mismatch between the destruction/quits rate and the creation/hiring one.
Moreover, the group said, “when political decisions are backed by economics reasoning, as they so often are, economists are unable to communicate ideas to the public, resulting in a large democratic deficit.”
You could easily level that criticism at the economists forecasting the impact of AI. What are people supposed to think when those who study the field come up with such wildly varying predictions? More importantly, what will politicians think they should do? Nothing, probably, given the confusion.
Well, yes, the politicians should do nothing about automation because nothing new is happening. Aa an entirely conventional economic education would tell us as I worked that out on the basis of nothing more than an undergraduate degree in the subject three or more decades back.
But here’s a lovely error:
If they were diverted into discussions of economic history, they might find out we are about to repeat the mistakes of the past and trigger another financial crisis. Even more inhibiting, their course might show that higher inequality dampens workers’ incentives to increase productivity, and might prompt them to ask why young economists in the City are paid colossal amounts of money to analyse bond yields or forecast oil prices. Pay them less, share the money around, and productivity might improve. Failing that, let a robot do their job.
Moving money, as in pay, around doesn’t change productivity in the slightest. It’s measured as hours of labour in with respect to value of production out. Changing peoples’ wages, redistributing this, doesn’t change that calculation in the slightest. And if Phillip Inman, economics editor of The Observer, had had a decent economics education he would know that.
Perhaps we should call this Worstall’s Corollary to Muphry’s Law?