The economists want in


Canadian Business considers the emergence of economists in this election.

When the prime minister announced in early April that the Conservatives would double the amount Canadians could contribute to tax-free savings accounts, University of British Columbia economist Kevin Milligan crunched the numbers in real-time on Twitter. “Normally it would just be us yelling at the faculty lunchroom walls about these things, but now we can do it on Twitter and get these views out to the world,” says Milligan. “I think it’s an important role for us. It’s about trying to steer the conversation a bit more toward where the evidence is, more immediately.”

For recent evidence, see Stephen Gordon on tax policy and Andrew Leach on environmental policy.


The economists want in

  1. “I think it's an important role for us. It's about trying to steer the conversation a bit more toward where the evidence is"

    What do most economists care about evidence? Most of these guys make psychoanalysts look evidence-based.

    • I call them "sociologists in suits".

  2. I like his point about getting the ideas out on Twitter. I think it's true — many of these "great conversations" that are had in university lunchrooms, coffee shops, and other oddball places, would probably have gone on forgotten, if not for a way to archive it (like the Internet).

    Unfortunately, I also think that with everyone having the ability to "archive" their content on the web, it's almost as if there is a deafening sound of archived content, thereby making it harder to sift through the silt.

    With Love and Gratitude,


  3. Going where the evidence leads would be great. Unfortunately, economics isn't much of a predictive science.

    • Depends on what. Microeconomics makes modest claims that are usually quite accurate. Macroeconomics, I'll agree, is a mess.

      • Could you give an example?

        • Auction theory, for example, does pretty well: search engines spend millions of dollars every year on consulting fees paid to economics professors studying auctions – it's worth it for them to have experts design their ad auctions.

          Market design is also an exciting and practical area of economics. For example, the medical resident match in the US was designed by economists. Before this system came about, the market was a huge mess resulting in outcomes that could have been improved for many while virtually hurting nobody. As a result, various systems were tried, and they unraveled very quickly as people found ways to game them.

          • Both of those things seem to be situations in which you are limiting it to a specific instance, has measurable results, and practical applications.

            But micro-economics doesn't limit itself as a field to things like that. For example, an aspect of micro-economics might be the study of political institutions on domestic household spending. That would be far less reliable and almost impossible to measure.

          • Furthermore (and I admit I am at a disadvantage not knowing the details) improving a professional matching process doesn't seem to have much to do with economics as it is commonly understood.

          • Yes, most people think all economists are macroeconomists and financial economists. But they are actually only a minority of the profession.

  4. I'm so glad somebody in the MSM is bringing this up. In between all those seat projections, I've been blogged about why we need a carbon tax and why cutting the GST is stupid. (I was also planning to post about why low corporate taxes are good, but the polls got too crazy.) All of the parties are proposing at least one big policy with a significant negative economic impact, although the Liberals under Dion had a platform that passed muster.

    And can we stop saying that Canadians rejected the Green Shift? Given what's going on, I think we can safely say that Canadians are just not in the mood to vote Liberal no matter what they propose.

  5. "The economists want in …'

    Do we really need more economists and their love of incentives in debate? Economists, and all other social scientists, have a profoundly poor idea how people behave yet they continue to craft policies that affect people in ways we don't understand.

    Leave people alone, economists. We are not here to be nudged this way and that.

    "Unlike physics or biology, the social sciences have not demonstrated the capacity to produce a substantial body of useful, nonobvious, and reliable predictive rules about what they study—that is, human social behavior, including the impact of proposed government programs ….. The most fundamental lesson that emerges from such experimentation to date is that our scientific ignorance of the human condition remains profound. Despite confidently asserted empirical analysis, persuasive rhetoric, and claims to expertise, very few social-program interventions can be shown in controlled experiments to create real improvement in outcomes of interest." Jim Manzi, City Journal, What Social Science Does and Doesn't Know, Summer 2010

    • You know.. you're right. I can certainly think of economists I'd rather weren't involved in politics

      • I puke a little inside my mouth every time somebody refers to Harper as an economist.

  6. There's no evidence the politicians are listening to the comments of economists or anyone else for that matter on twitter in formulating policy.

    But if the talking heads and twitter commenters think they are making a difference, or it makes them feel more useful/important so be it.

    Btw, how does productivity improve when these types of individuals spend a good portion of their publicly funded time hanging out on social media?

  7. Well, the tax side of the policy was just what you said: a simple Pigovian tax on carbon. I agree that the other side was too scattered. It would have been a much easier sell if Dion had said: all of the proceeds from the carbon tax will be used to cut the income tax, for example.

    • Shifting tax revenues from income to consumption though has a very hard income on those with low incomes that can't take advantage of tax breaks, and isn't really a good deal for those that depend on fossil fuels for commuting to work or distributing goods as a business.

      Why not instead trade one consumption tax for another? In other words, cut the GST, and add a carbon tax to goods made of plastic, petroleum products, and electricity? Wouldn't that be simpler?

      • That wouldn't be bad, but income taxes are more harmful to the economy than consumption taxes. The reason is that on top of adverse effects on incentives to work that both have, income taxes result in cascading taxation for savers. (You already get taxed on what you make. Then you get taxed again if you save that after-tax money on the return you get. And so on.) By contrast, a consumption tax taxes all income once – at the time it is spent, whether it's now or later.

        The whole point of a carbon tax is to get people to change their behaviour. It's supposed to be a bad deal for people who depend on fossil fuels – if it weren't, it wouldn't be effective. Note that cap-and-trade or regulations would do the same – it's just that the costs would be more hidden. In fact, for the same amount of emissions reductions, regulation is more harmful to the economy than a carbon tax. This is because a carbon tax allows the market to find the cheapest way to reduce emissions; equally efficient regulations would require an omniscient and benevolent government…

        That said, it's true that a carbon tax + income tax cut would hit people that don't pay income tax. The solution is to create a refundable tax credit. That was part of the Green Shift.

  8. Very good post. I just found your blog and wanted to say I really enjoyed reading your messages. Anyway I'll be subscribing to your feed, and I hope you post soon.

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