Saturday, February 8, 2014

How my views have changed over 40 years

They say if you still believe at 50 what you believed when you were 15, you haven't lived. Just this week I've now worked at Fairfax Media as an economics journalist for 40 years. Those ages don't quite fit, but my views today are certainly very different from what they were when I started.

When, disillusioned with life as a chartered accountant, I began at Fairfax, most of my effort went into relearning the economics I was supposed to have learnt at university. There it didn't make much sense to me and I had trouble remembering enough of it to pass exams. Once passed, it was promptly forgotten.

A lot of my re-education came at the hands of the nation's most high-powered econocrats, who are remarkably generous with the telephone tutorials they're willing to give journos who seem genuine.

So at first most of my effort went into mastering and then propagating economic orthodoxy. I still see it as an important part of my job to help readers understand what it is that leads economists to do and say the things they do.

Newspaper economics tends to be pretty basic. Doing the job year after year is like answering the eternal year 12 economics essay question: "From your knowledge of economic theory, comment on ..." Joe Hockey's budget preparations, cabinet's decision not to give SPC Ardmona a $25 million subsidy, the government's inquiry into the financial system.

But one ambition has been to introduce something a little more sophisticated, to lift the level of analysis from introductory to intermediate. To this end I've devoted a fair bit of my free time to reading the latest books about developments in economics and, increasingly, psychology.

Though Australian academic economists write books that seem intended to impress by being incomprehensible, leading American academics write (carefully footnoted) books that explain their findings to the average intelligent person. Sometimes they even make the best-seller lists.

I've been looking for stuff that would interest readers, but also trying to deepen - and broaden - my understanding of the topic. It's this broadening that's done most to change my views about economics and how I should do my job.

Economics is the study of "the daily business of life" - earning money and spending it, buying and selling assets such as homes and shares, borrowing to finance the purchase of assets and saving to repay debts. Macro-economics is the study of how whole economies work and how governments can "manage" them, seeking to limit inflation and unemployment and promote growth.

So, contrary to my conclusions at uni, economics has a lot of practical application. There's always plenty of interest in the topic and plenty of coverage in the media.

But as I've got older and read more widely I've realised that, if anything, we tend to take economics too seriously. It deals only with the material side of life - getting and spending - and in this more materialist age we run a great risk of focusing excessively on getting and spending at the expense of other, equally important aspects of our lives. I've concluded there's more to life than economics.

Our heightened materialism means we take economists far more seriously today than we did 40 years ago. Their message is that we're not trying hard enough: not doing enough to change ("reform") our economic arrangements to foster faster growth in the economy and hence a more rapidly increasing material standard of living.

But I've concluded economists suffer from the same failing as other specialists. In their enthusiasm for their topic they want to take over your life. The economists' union wants to make becoming more prosperous the nation's central objective. And these guys urge us on with little thought about what trying harder and doing more may imply for the other dimensions of our lives.

You and I know most of the satisfaction in our lives comes from our personal relationships. But relationships aren't part of the economists' model, so they urge particular "reforms" without any thought about the implications for our relationships. Politicians act on their advice without such thought, either.

So, to borrow a cliche, economists need to be kept on tap but not on top. These days I try to explain the rationale for economic policies - what they're trying to achieve and how they're supposed to work - but also play the role of a sort of economics theatre critic, adding a critique of economics, economic policies and economists.

I've learnt there's little correlation between being a successful business person and having a good understanding of economics. They seize on an argument that seems to support the line they're pushing. Whether it's logical they seem not to know or care.

Economists study and advocate efficiency in the way we combine economic resources - land, labour and capital - to produce goods and services. This is supposed to maximise material prosperity. The position I've come to is that we should strive for efficiency unless we've got a good enough reason to be inefficient.

For instance, it's inefficient to have government rules specifying minimum levels of local content on television. It would be much cheaper to buy not just most but all our TV programs from America. But I agree it's better to force our TV channels to produce a bit of Aussie drama. Culture matters.

Even so, knowing where to draw the line on inefficiency ain't easy. It's too short-sighted to expect that those industries, interest groups or regions that have managed to extract assistance from government in the past retain their privileges forever, or that industries adversely affected by overseas developments be given ever-growing government assistance so nothing needs to change and all pain is avoided.

Life's a bit tougher than that. Change is unrelenting. It's our continuously changing circumstances - and, I hope, our improving understanding of how to respond to challenges - that keeps me going.