This episode features highlights from the past 20 episodes. Economics Explored host Gene Tunny plays clips that illustrate key themes like using economics as a scientific framework, considering different perspectives, and remembering the limitations of models. The clips feature discussions on COVID policies, the role of experts, projections of resource depletion, nuclear energy, and the challenges of development economics. Gene hopes listeners find the highlights thought-provoking and looks forward to feedback on improving the podcast in the new year.
Please contact us with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored.
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What’s covered in EP221
- Economics and decision-making with a focus on open-mindedness. (0:03)
- Using experts in decision-making and tolerating dissent. (3:12)
- COVID-19 modelling and its limitations. (9:34)
- Economic development, critical thinking, and foreign aid. (12:41)
- The limitations of economics and the need for interdisciplinary approaches. (19:25)
Takeaways
1. Economics is a powerful framework, but we should remember its limitations and consider insights from other disciplines like psychology.
2. We must be open-minded and tolerant of dissenting views when relying on experts to inform policy decisions.
3. Numerical models and projections should be viewed cautiously as they can exaggerate outcomes, given the complexity of real-world systems.
4. It’s important to think critically about all options when analyzing issues and not come to them with preconceived notions or biases.
5. Effective policymaking requires understanding incentives, weighing tradeoffs, and considering how people may respond differently based on cultural and social factors.
Episodes the highlights are clipped from
https://economicsexplored.com/2023/10/06/growth-or-degrowth-w-oliver-hartwich-nz-initiative-ep208/
Transcript: The Power of Economics: A Look Back at the Past 20 Episodes – EP221
N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.
Gigi Foster 00:03
Even if you think that I’m under balling that low balling that, in fact, even if you think the Prime Minister’s estimate of 40,000 people who would have died is correct. If you look at the costs of lockdowns, they still weren’t worth it. Right. So even if I’m totally wrong as Prime Minister’s right, the lockdown still shouldn’t have been pursued.
Gene Tunny 00:25
Welcome to the economics explored podcast, a frank and fearless exploration of important economic issues. I’m your host, Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, Happy New Year. It’s the first episode of 2024. In this episode, I’m going to play some highlights from the last 20 episodes. I’ve chosen these highlights. So they’re consistent with the theme of using economics in a scientific way to better understand our world and to make better decisions. Take to simple principles that people respond to incentives and that things must add up and you end up with powerful insights. You start to see constrained optimization problems everywhere. You start with a presumption that people are trying to make the best decisions for themselves based on the incentives and constraints that they face. And you think about the trade offs involved in decision making. It’s not a perfect framework, but it gets you a long way in analysing important issues. And I hope I’ve demonstrated that on this show through various conversations that I’ve had over the last four years. One of the other points I make on the show a fair bit. And this has guided my choice of highlights is the importance of being open minded, which I’d argue is consistent with the scientific approach. One quote I think a lot about us from Richard Feynman who said that the first principle is that you must not fool yourself, and you are the easiest person to fool. We should be open to a wide variety of views, and be open to vigorous debate on important issues. Okay, please let me know if you have any reactions to the clip, I play into this episode or anything that I say or my guests have said, I’d love to hear what you think. Also, please let me know any ways that I can improve the show in 2024, you’ll find my contact details in the show notes. Right. So let’s get into it. I hope you enjoy these highlights from our last 20 episodes. The first clip I’ve chosen as a highlight is from Episode 201. On the role of experts in a democracy, it’s with Peter Kirti, from the Centre for independent studies. So I’m an adjunct Fellow at CIS. And Peter’s one of my colleagues there and he’s, he’s always a great person to chat with about these big philosophical issues. I really like are Peter reminds us about the importance of being open minded, and tolerating dissenting views. Here’s the clip.
Peter Kurti 03:11
What I’m saying is that if we’re going to use experts, as we are bound to do, we, as citizens of a liberal democracy in Australia, need to be thoughtful about the way in which we engage them in ways in which we hold them to account. And we also need to be stronger about defending freedom of speech in the sense that I think we need to be more willing to tolerate dissent, we need to be able to say, well, this group of scientists over here says, you know, there is a climate catastrophe, for example, whereas this group of scientists over here saying, well, warming, and cooling is just part of a trend. These are parts of trek, these are trends that that take place in on on the earth over a period of years. We need to be able to tolerate dissenting views. I’m not saying we are necessarily able to determine which view is correct. But we are increasingly reluctant I feel to tolerate it today. We’re reluctant to tolerate dissenting views, because we want to have the right answer and we want to know what the right position is the right solution is. We saw that during COVID, of course, debates about the efficacy of vaccine mandates or mask mandates or social distancing, dissent was not tolerated. And I think that if we are going to make an intelligent use of experts, we do need to be willing to tolerate dissent and to live with perhaps the discomfort that comes from having dissenting views.
Gene Tunny 04:41
Yes, yes, exactly. Yeah. It makes it difficult for politicians, though, if, if the experts don’t agree so how, how do we think about that or what’s the relationship mean? You mentioned tolerating dissent. That’s one of your rules or your tips for getting experts like using them effectively. I mean, there’s obviously a role for expertise and people who understand the issues and they provide the advice to the government of the day. How do you think about how those experts should be used? And I mean, what the decision makers do when there is a situation of of that have that dissent to mean? Is it up to them to judge where the weight of evidence is? I mean, because the politicians will say, Well, look, the bulk of evidence is in favour of this hypothesis. It could be climate change, for instance. So yeah, how do you think about that, Peter, how should politicians use experts?
Peter Kurti 05:38
Well, I think it really adjust the way that you have outlined by examining what it is the experts are saying, By assessing the evidence by determining where the bulk of opinion lies, and then using judgement and skill to make a decision. We can apply that sort of framework to any policy area, we might think about. Migration levels of migration, there are people experts who say Australia, we can’t have a big Australia, others say we can have a big Australia, and each side will mount will present evidence to bolster their own arguments. And I’m sure believe quite passionately, the evidence that the cogency of the evidence they present, but somebody then has to make a decision about how we do that, and an elected government has to take a position, we can see it in terms of going to war, or whether we supply arms, for example, to Ukraine, we went into Iraq 20 years ago, very controversially, but we did so on the bait, I mean, at the Howard Government did so on the basis of evidence that was presented. And as we remember, because we know those around at the time, there was a huge amount of dissent in this country about that. At the end of the day, it’s elected representatives who have to make the call and are then held accountable. So I think it’s a it’s a difficult role. And I’ve never been an elected politician. So I’ve never been in the position of having to implement this. I’m simply really someone on the sidelines who’s advocating for a certain, as it were a certain style, of style of living, if you like. But I think it’s bias by weighing and assessing, carefully, evidence that is presented. And I think not allowing fear, I talked about the importance of political courage, not allowing fear of adverse consequences to deter somebody to do to take you from making the right decision, for example, when I mean, how many years ago was it now it’s, it’s must be nearly 30 years, since the Port Arthur tragedy. And the Howard Government decided that they were going to take a stand on on firearms. And there’s a lot of controversy about that at the time. I remember not being in Australia very long. And the view was that people living in the country or people who are really attached to their weaponry wouldn’t be happy with this. And there were arguments on both sides. But I think the weight of public opinion, or rather, I should say this put it this way. I think the Howard Government made it made a decision based on on the evidence and the politics, and also having to judge which way public opinion whether public opinion would accept this. And it was a controversial decision. But I think, given the horror of what happened at Port Arthur, the Australian public did accept it. But there was no telling which was the right what was the right decision or not. I think it’s in a sense, you only know whether you’ve made the right decision with hindsight.
Gene Tunny 08:52
This next clip features the one and only JG foster professor of economics at the University of New South Wales, in Sydney. Tim Hughes and I spoke with Gigi and Episode 205, which was on the costs of COVID policies to young people. I really liked this clip, because it reminds me why we should be careful when we’re relying on the results of numerical models, particularly projections, which show that something is going to get really bad, or, you know, we’re going to end up in a doomsday scenario. So these type of models were heavily relied on during the pandemic. I think that models have their place of course, but we need to remember their limitations and what their underlying assumptions are. Okay, let’s see the clip.
Gigi Foster 09:34
In mid March, you may even recall Neil Ferguson’s ICL modelling came out saying that, you know, 60 million people around the world were going to die or something. And of course, as we know, the COVID death count even now is you know, an order of magnitude less than that. And by the way, Niall Ferguson had been wrong in the past. These epidemiological models that are run in a simulated environment in a computer that necessarily do not include all of the real World variables that are actually relevant to whether people die or suffer from diseases are notoriously exaggerative of the bad outcomes that may occur from the new disease threat. Right that has happened again and again. And again. We’ve had SARS and the swine flu and the you know, all these different fluids that have been modelled and they’ve basically always there has been some coterie of doomsaying epidemiology, people who have said, based on my model, everybody’s gonna die, right? That’s just a common thing it happens, right? And you know why? Because the, you know, the media loves that stuff. It’s, you know, they get ahold of a guy like that, who will be, you know, put on a bleeding headline, that will get eyeballs, right, and they get status, and they get to be the person who really cares about people, because if you care about people, then you know, don’t you care that they’re all gonna die, or I mean, that becomes this whole narrative. And it really crowds out actual science, actual science is based, at best on real data, real data, right? Of course, we have theories about what happens, and we need to use those to structure our understanding of our world. But our world is so incredibly complex and dynamic. And there are endogenous factors that are happening and shocks that we can’t predict. There’s just so much going on, that all models are wrong, as somebody said in my discipline, but some are useful. That’s how you should see a model. So what I did in order to produce that estimate of how many people in a counterfactual non lockdown Australia would have succumbs to COVID is I looked with Sanjeev we looked at the countries in the world that had low restriction levels. So obviously, Sweden is one. Yeah, but it also used another counterfactual, which was about six I think other countries with populations over a million that had low restrictions, mostly in Europe, I think Taiwan might have been in there as well. And we basically took, you know, the average deaths from COVID. This is real data, real data, what they actually experience not something that comes out of a computer generated simulation, but actual data, because we just believe that much more. And then we of course, adjusted for population and then applied it to Australia. And we say, well, this is our best guess right now. Even if you think that I’m under balling that low balling that, in fact, even if you think the Prime Minister’s estimate of 40,000, people who would have died is correct. If you look at the cost of lockdowns, they still weren’t worth it. Right. So even if I’m totally wrong, if my minister is right, the lockdown still shouldn’t have been pursued. Right. But I also think that the Prime Minister is using these simulation models, these SR models or something like this, or you know from the Doherty Institute, or some other kind of, you know, institute that was supporting the narrative and coming out with these doomsday scenarios, to come up with that figure and make himself look like a saviour.
Gene Tunny 12:41
This next clip, which is a short one is from Episode 208 on degrowth, with Oliver Hartwich from the New Zealand initiative. Again, it’s on the theme of the limitations of modelling and making forecasts and projections. It reminds us that we should be sceptical regarding any predictions of impending doom. Let’s hear from Oliver.
Oliver Hartwich 13:02
The other idea of course, in all of us resource depletion seems to be one of these ideas that you simply cannot ever refute, keeps coming back. Going back to amorphous Of course as the starting point, but William Stanley Jevons in the 1860s actually predicted the world would run out of coal. But it’s this general tendency to linear thinking where everything is always continuing on a certain path. I mean, there was a letter writer, I believe, in the London Times in the early 20th century, predicting that London at some stage would be under six feet of horse manure from all the offices in the city, it has this tendency to always think we’re just continuing on the same path and it will never change.
Gene Tunny 13:44
The next clip is from Episode 202. On the net zero transition with Andrew Murdock from RK energy. It reminds us of the importance of thinking through all available options, and not coming to an issue with biases and preconceptions. Let’s play the clip.
Andrew Murdoch 14:01
We certainly should be considering nuclear as one of the options. The engineering me likes to consider things with a sceptical and inquiring mind. So what are all of the options? What are the ones that will work? What are the ones that won’t work? What will they cost? What are the probability that we will achieve the outcomes that we’re trying to achieve? So in the context of assessing any type of technology, we should be looking at? What is it going to cost? What are the consequences? How does it impact our society? How does it impact our landscape? My personal view is that that advanced small modular reactors have a role to play, particularly when we’re getting into the very deep baseload. So the power that has to run 24/7 at very high levels of reliability, that’s going to be very difficult and expensive to do with intermittent renewables and it is possible to do it with independent renewables. It’s possible to deal with intermittent renewables and storage and gas topping, but another arrow in the quiver of decarbonisation tools that we could use is small modular reactors.
Gene Tunny 15:11
This next clip is from Episode 209, which was a recording of a seminar that I spoke out with the University of Queensland students that were students in the politics, philosophy, and economics degree. It illustrates the importance of thinking critically of really thinking through the implications of a course of action. I talked about a notorious incident that occurred in the history of convict transportation to Australia. It was the second fleet and 7090 rather than the Third Fleet, I should note, I mentioned the Third Fleet in the conversation with the UQ students. So I must remember that I’ve linked to an article in the show notes, which explains all the relevant facts, so you can check that out. Around two out of every five convicts in the second fleet died either at sea or shortly after landing. The contract is transporting the convicts were paid based on the number who bought the ships in England, rather than the number who disembarked in Australia. And they had the right to sell whatever provisions were left over from the voyage. The results were tragic. Let’s hear what I had to say.
Joe 16:16
As someone who’s working in the consultancy industry at the moment, what’s your take on the ongoing scandals that have been happening involving PWC and other consulting firms at the moment? Do you think this may be raises questions or concerns about the efficacy of outsourcing public policy?
Gene Tunny 16:36
Oh, look, I think there’s always been concerns about the efficacy of outsourcing. And if you look at the history of contracting out, I forget which fleet it was, but was it the Third Fleet, there was one some of the convicts ships are all put out to tender right by the by HM Treasury, or the Admiralty in the UK. And the Admiralty or the the Treasury they want. They want the most people to get out. They want people to come to Australia, they don’t want people to die on the ship. Right? They actually want people to survive the voyage. But the ship owners, the ones who are who win the contract, they want to fulfil the contract to just to the letter so they can get the payment from the Treasury. But they don’t really care much about the people who were the people survive unless you make that explicit in the contract. So and there was a scandal with one of the convict ships, if I remember correctly, I can look it up and we can put it in the show notes. So yeah, there’s always been issues with government contracting, there’s always been concerns. And so I’m a great believer in outsourcing because I think it does save money. But you’ve got to do it for specific things for specific jobs that you can keep a close eye on and where you trust the people to deliver those jobs. Okay, we’ll take a short break here for a word from our sponsor.
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Gene Tunny 18:32
Now back to the show. Rado, this is an ultimate clip is from my conversation with Dr. Paul Rivera, from Episode 213 Regarding the American dream. At the beginning of our conversation, we talked briefly about Paul’s work and economic development for USA ID. He told me a story that well illustrates one of the fundamental challenges in providing foreign aid, again, is on the theme of being open minded this clip about thinking critically and not having preconceptions. Here, the preconception came from a standard model of economic development. So this clip is a good reminder to economists that we shouldn’t fall too much in love with our own models. We need to think about whether any psychological or cultural issues may be relevant to the situation that we’re analysing. Okay, let’s listen to the clip.
Paul Rivera 19:25
One of my first consulting jobs that I ever that I ever took was with one of these large international financial institutions, which shall remain nameless, but they had a they had been working in Western Africa somewhere with these with these fishery fisherman communities. Somebody had the idea that, you know, in my last situation, they said they had worked somewhere in East Asia, I think, I believe it was in Thailand, and they had worked with Fisher communities and they had created this project through which they purchased sort of these laws. on boats with motor but with motors that would help the fishermen they said basically, that the problem in that situation was that there was a sort of a low level capital investment. And so they just infused this capital. And that’s what was needed to bring our productivity. And so they said, copy paste, it worked in East Asia, so it’s going to work in West Africa. And they they did absolutely no consultation. Okay, so I came in actually, as an ex post evaluator, about three years after the project had been completed. And so I go in to this community where I know they had worked. And I started asking about the boats and the fishermen and how things are going and people are looking at me with blank stares, like what are you talking? I’m like, I’m like, a few years ago, there was this project and this organisation came, and they’re like, Oh, you have to talk to the chief. And so this particular country still had sort of a chief says chief type chiefdoms society organisation, right? So they take me to the chief, and the chief walks me down to the beach, and I see 10 of these boats upside down, sitting on the beach completely rotted out, and there’s no motors. Okay. And so what they, when I started asking about it, he said, Well, what is what essentially they didn’t understand was that their society is a very highly structured society. And the fishermen, they were considered to be sort of not high loss, high status, folks. And so this organisation had come in, and given a very high status gift, in effect, to a relatively not high status person. And so the natural thing for them to do was to say, I can’t accept this gift. So they gifted all of the boats to the chief, the chief is the chief. So the chief doesn’t fish. He doesn’t, he’s not a fisherman. So the chief basically sold the boats, sold all the motors, he used the income to buy himself a new house in Switzerland. And that was it. Right? So what happened, right, and I can, I can give you five other similar examples. There was there was basically they external parties came in, they gave some sort of analysis of what they perceive to be the problem, they copy pasted a solution. And they put in millions of dollars for it. And at the end of the day, there was no real impact from that, because they failed to secure the buy in from the community, they failed to do the basic consultation that would show you know what it is that was actually needed in those communities. So you know, that’s our, that’s our big thing is really, really engaging in listening. You know, before, you know, when we talk about wasting taxpayer dollars, and that sort of thing, it’s our responsibility to make sure that that’s that that’s going to be used in a proper fashion, you know.
Gene Tunny 22:44
Now it’s time for our final highlight. It’s another clip from my wide ranging talk with UQ students. And it’s another reminder of how regardless of the power of economics as a way of thinking, economists do need to consider insights from other disciplines. The clip begins with a question from the event MC Joe Christiansen, let’s hear it. Russ Roberts, who is the host of econ talk a podcast, he refers to economics as an imperialistic discipline, this idea that, you know, being like, you know, economists often try to apply economics and economic thinking too broadly, to domains where the assumptions may no longer hold, and its utility is questionable, I guess, someone that might come to mind is someone like Gary Becker, you know, bringing the idea of economics and supply and demand to the family and areas that typically it hadn’t been applied to before. And for you personally, what do you think the limits are of economics as a discipline, and other things that economics can’t explain? And we might need other sort of perspectives to understand? I think, certainly, I mean, even economics requires other perspectives. So I mean, I think economics is an incredibly powerful tool. And I mean, you know, it’s a science of the economy and studying the economy there. There’s some core economics, you need to know, where it gets difficult is trying to predict behaviour and, and in in cases where people don’t act fully rationally. And that’s what you need to bring the psychology. Right. So I think any idea that economics is the imperialist discipline, and we’ve got all the answer is I think, that was destroyed by the financial crisis. I mean, maybe up until 2008 People could have believed that, but after 2008, I think there was a recognition that okay, we haven’t really solved the business cycle. We thought we’ve solved the business cycle is this Great Moderation. markets aren’t always rational. You can’t. There are periods of irrationality and economics is not going to help you there. That’s where you need psychology to bring Psychology and that’s why behavioural economics is trying to bring in psychology with economics. So, yeah, I think there are clearly limits to economics and one of the one of the important limits or considerations, is that economics to the extent Well, if it’s, you could say it’s a science or it’s a study a field of study, it can answer questions of fact, or we can make predictions. Or we could argue, analyse what might be the most efficient course of action from the perspective of consumers consumer welfare, or from economic welfare, broadly construed. What we can’t necessarily answer is what’s the best thing to do for society? Because then you’ve got ethical issues, value judgments, how do we okay, if something is affecting the environment, for example, and that affects future generations? How do we, how do we analyse that that those can be difficult issues? Or how do we make choices regarding health policy measures? So it’s not always they’re not always issues where economic considerations are the final determinant, you may need to bring in value judgments? The whole distinction that thing was David Hume between isn’t bored. Yeah,
Joe 26:14
yeah. Yeah. Yeah, good. All.
Gene Tunny 26:19
Right. Oh, those are all the highlights that I have for now. If you’re a regular listener, I’d like to thank you for tuning in over the last 12 months. In 2024, I’m aiming to dive deep into some critical issues, and to really explore all the relevant theory and evidence on them. Next week, I will talk about some recent things that we’ve learned or relearned about the limits of fiscal policy based on our experience during the pandemic. If you’re a new listener, I hope that you continue listening to the show. Whether you’re a new listener, a regular listener, or an occasional listener, please let me know how I can improve the podcast. Over the years I’ve been grateful for all the feedback on what’s been said on the show, about the types of guests you like and the topics that you’d like me to cover. I want this podcast to be as informative and as objective as possible. So please get in touch with any ideas on how I can improve it. My contact details are in the show notes. That’s it for this episode. And all I have to say now is Happy New Year rato thanks for listening to this episode of economics explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact at economics explore.com Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.
28:06
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Credits
Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple Podcasts, Google Podcast, and other podcasting platforms.