2016 has not been a good year for economics. Brexit and the US Presidential election result both implied a rejection of free trade and free markets by large numbers of people in the UK and US. Economists have learned that free trade and free markets need to be continuously defended and justified. The Economist magazine has certainly absorbed this lesson, and you may recall its recent Why they’re wrong cover story regarding the new nationalist movements across the world. They certainly are wrong, as they ignore the large benefits of globalisation that have accrued to people all over the world, including western consumers benefiting from cheaper goods and people being lifted out of poverty in emerging economies in the hundreds of millions. But The Economist and economists arguably should have seen the signs of discontent earlier and have been better prepared for what has transpired.
As Secretary of the Economic Society of Australia (Qld) I would naturally suggest that an ESA Qld function would be a good place to reflect on the events of 2016. So it is timely that we are having our Christmas function next Tuesday night (29 November) in the Gibson room at QUT, Gardens Point campus, Brisbane:
How Economics Improved the World in 2016
Join us for the Economic Society’s final event for the year. The function will feature an update from Professor Flavio Menezes on the activities of the Society for the year. This will be followed by a light-hearted look at how economics improved the world in 2016 with commentary from Professor Flavio Menezes and Professor Lionel Page of QUT and end-of-year drinks and savouries.
I will be very interested in Flavio’s and Lionel’s views on just how economics has improved the world in 2016. I would suggest that our knowledge of the economy and our understanding of the impacts of fiscal and monetary policies have yielded ongoing benefits. Improvements in economic knowledge since the 1930s meant we avoided a second great depression which could have been prompted by the financial crisis of 2008. Economic conditions may have been even worse today were it not for the actions of economists. That said, the weak performance of advanced economies since 2008 should restrain triumphalism, and of course economists have to acknowledge that very few saw the financial crisis coming.
Finally, I should note I remain hopeful that the ideals of free trade and free markets will endure the current challenges, and I am inspired by the growing number of Australians who believe in free institutions. For example, consider the Liberty Works submission to the current Queensland trading hours review, authored by my friend Justin Campbell. The submission cites Friedrich Hayek, whom no doubt would support trading hours deregulation. I am hopeful that economic arguments in favour of deregulation will prevail, and Queensland will soon have much more liberal trading hours and the ability to buy liquor in supermarkets.
Friedrich Hayek wouldn’t object to you picking up a bottle of wine at your local supermarket, which would be allowed to open much later than 9pm.
It’s probably more accurate to say 2016 has not been kind to “mainstream” contemporary economics. It was only 1 or 2 generations ago when some economic schools of throught would have said these events we’re kind to economics. Who’s to say a school of economics in the future would say they make sense too?
Fair point, although it would be hard to find an economist who doesn’t believe in free trade (at least in principle). Thanks for the comment, Alistair.
Free trade has resulted in cheaper goods and in many cases resulted in countries positioning themselves to what they can do best. Even without free trade this was happening simply through the relativity between cost of labour. Asian economies and their people’s standard of living have improved as a result. Our economy has seen the transition from manufacturing to services as well as some technology based industries. Not forgetting mining which has become more successful here not just because we have the minerals but because we have been innovative in exploiting them cost effectively. BUT, there has been a cost to many western countries where unemployment in sectors has grown significantly. These were people who did lower level manufacturing jobs who have not been able to or had the opportunity to transition to the new economies. They were the Trump supporters and the Brexit voters. Luckily we do not have too many of those people here…yet.
We need to be vigilant and plan however as increasing automation and AI technology will produce more unemployables who will become disaffected. And, they vote. People reading this may also find themselves in that position so we should not be too smug that we are protected.
Good points, Russell. Thanks. The advances in AI/machine learning are incredible and will have huge implications for the professions. I expect accountants and lawyers will be acutely affected.