Posts Tagged ‘economics’

Hollande’s France is dragging down the Eurozone and the world

November 15, 2013
Photo - AFP

Photo – AFP

Francois Hollande is a socialist of the old school and about a century behind the times. Fundamentally he has few new ideas beyond tax the rich and create more public sector jobs. He is not even very popular at home just now – but the French have only themselves and Sarkozy’s excesses to blame for having him there. Dominique Strauss-Kahn’s sexual excesses also helped. He makes impossible promises with a straight face. He promises to cut state spending without reducing public sector jobs. He will improve competitiveness without  reducing state subsidies. And he has promised to reduce unemployment by the end of this year. Nonsense promises are not doing much for his credibility.

France’s credit rating is falling and even The Guardian has little good to say about his administration:

The Guardian: France’s second credit-rating downgrade by Standard & Poor’s in less than two years is as damaging politically for the socialist François Hollande as it was for his rightwing predecessor Nicolas Sarkozy, who lost the election shortly after France lost its AAA rating in January 2012.

S&P directly attacked Hollande’s economic policy, questioning the socialist government’s capacity to repair Paris’s stuttering economic motor. It said the problem with France was that the government’s tentative reforms were not enough to lift growth in the eurozone’s second largest economy.

Hollande, recently found to be the most unpopular French president on record in a poll by BVA, was already struggling to sell his economic measures to the nation. “The recovery is here,” Hollande declared in August after a small rebound in growth following months of stagnation. But real, sustained growth is expected to be slow in returning. …… 

And now the economy of France, along with that of Italy, is actually shrinking. The global recovery needs Europe  – and not just Germany – to do its bit. Instead, Hollande’s schoolboy economics are not just threatening the Eurozone recovery but actually threatening to postpone the recovery.

Reuters: The euro zone economy all but stagnated in the third quarter of the year with France’s recovery fizzling out and growth in Germany slowing. The 9.5 trillion euro economy pulled out of its longest recession in the previous quarter but record unemployment, lack of consumer confidence and anaemic bank lending continue to prevent a more solid rebound.

In the three months to September, the combined economy of the 17 countries sharing the euro grew by a slower than expected 0.1 percent. In the previous quarter it rose 0.3 percent – the first expansion in 18 months. The euro fell to a session low in response.

The French economy contracted by 0.1 percent, snuffing out signs of revival in the previous three months. It had been expected to post quarterly growth of 0.1 percent and has now shrunk in three of the last four quarters. ……. 

Unemployment is still increasing even though the number of French seeking jobs outside the country is also increasing. The rich have been fleeing Hollande’s swingeing taxes in droves.

The Telegraph: 

France’s economy has buckled once again amid official warnings of an explosive political mood across the nation that threatens to spin out of control.

French output fell by 0.1pc in the third quarter and Italy remained trapped in recession, dashing hopes of a sustained recovery in Europe. “It is no longer a question of whether the eurozone can achieve ‘escape velocity’, but whether it can grow at all,” said sovereign bond strategist Nicholas Spiro.

The latest data show a continued erosion of France’s industrial base and export share. It risks shattering the credibility of President François Hollande, who has been talking up recovery for months. A YouGov poll showed his approval ratings have dropped to 15pc, the lowest recorded for a French leader in modern times.

While the risk of a eurozone bond crisis has greatly receded since the European Central Bank agreed to act as a lender of last resort in July 2012, this has been replaced by slow economic attrition. It resembles the mid-1930s slump under the Gold Standard and is fuelling political crises in a string of countries.

Le Figaro said loss of confidence in the French government is turning dangerous, citing a confidential report based on surveys by “prefects” in each of the 101 departments. “All across the country, the prefects described the same picture of a society that is angry, exasperated and on edge. A mix of latent discontent and resignation is being expressed through sudden eruptions of fury, almost spontaneously,” said the document. The report warned that people were no longer venting their feelings within normal social structures. Increasing numbers are questioning the “legitimacy” of taxes. …… 

But there is no sign that Hollande will change from his classic policies of more taxes to support a profligate state sector and a bloated welfare system. Regulated austerity is called for but Hollande’s approach will only lead to an unregulated, painful and enforced austerity as in Greece and Spain.

I still believe in Europe and in many French firms but I have taken the precaution of shifting some of my (small) savings out of French stocks. France has not reached its bottom yet!

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Posted in Bureaucracy, Business, Economics, European Union, France, Politics | Comments Off on Hollande’s France is dragging down the Eurozone and the world

Economists are – by and large – religious or political advocates

August 1, 2013

A recent article by March Buchanan in Bloomberg got me to wondering why “Economists” and “Economics” – in spite of their gross and sometimes spectacular failures – have the high status they do. I come to the conclusion that “Economists” are – by and large – just religious or political advocates and “Economics” is no more than a study of social behaviour.

Is Economics a Science or a Religion?

The idea of economics as religion harks back to at least 2001, when economist Robert Nelson published a book on the subject. Nelson argued that the policy advice economists draw from their theories is never “value-neutral” but foists their values, dressed up to look like objective science, on the rest of us.

Take, for example, free trade. In judging its desirability, economists weigh projected costs and benefits, an approach that superficially seems objective. Yet economists decide what enters the analysis and what gets ignored. Such things as savings in wages or transport lend themselves easily to measurement in monetary terms, while others, such as the social disruption of a community, do not. The mathematical calculations give the analysis a scientific wrapping, even when the content is just an expression of values.

Similar biases influence policy considerations on everything from labor laws to climate change. As Nelson put it, “the priesthood of a modern secular religion of economic progress” has pushed a narrow vision of economic “efficiency,” wholly undeterred by a history of disastrous outcomes.

The practice of the black-magic that is considered economics – for it is certainly no science in the Popper sense – gets much of its cloak of respectability from the fact that the Nobel Prize exists (more correctly the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel).  

The Nobel prize in Economics should never have been created. In fact Nobel never wanted one and he is probably spinning in his grave as prize winners, one after another, prove – at best – to be mere historians and – at worst – religious or political zealots.  The prize adds more stature to the discipline of economics than it deserves. Almost every economic theorist has developed wonderful hindcasts but few – if any – have produced theories which can consistently make correct forecasts.

Wikipedia – The Prize in Economics is not one of the original Nobel Prizes created by the will of Alfred Nobel. ……. In his speech at the 1974 Nobel Banquet Friedrich Hayek stated that if he had been consulted whether to establish a Nobel Prize in economics he would “have decidedly advised against it” primarily because “the Nobel Prize confers on an individual an authority which in economics no man ought to possess… This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence. But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally.”

The Nobel family are among the harshest critics of the Economics Prize being associated with Alfred Nobel:

“The Economics Prize has nestled itself in and is awarded as if it were a Nobel Prize. But it’s a PR coup by economists to improve their reputation,” Nobel’s great great nephew Peter Nobel  told AFP in 2005, adding that “It’s most often awarded to stock market speculators …. There is nothing to indicate that [Alfred Nobel] would have wanted such a prize.”

Members of the Nobel family are among the harshest, most persistent critics of the economics prize, and members of the family have repeatedly called for the prize to be abolished or renamed. In 2001, on the 100th anniversery of the Nobel Prizes, four family members published a letter in the Swedish paper  Svenska Dagbladet, arguing that the economics prize degrades and cheapens the real Nobel Prizes. They aren’t the only ones.

To make it worse the Prize  is now “available to researchers in such topics as political science, psychology, and sociology”.

The political advocacy which is inherent in the theses promoted by Nobel Economics laureates have led to spectacular failures. Milton Friedman and his rabid monetarism gave rise to many of the crises today, Muhammad Yunus and the Grameen bank with their concept and practice of microcredit have exacerbated the risks of the debt trap into which so many small farmers have fallen. Krugman’s politics are essentially of the left and usually encourage profligacy. His analyses are more destructive than constructive and he has fault to find with almost every other theorist cutting across all political boundaries. He himself has yet to advocate any consistently successful theories. Amartya Sen focuses on analysing the “economics of poverty” but has nothing real to offer for its alleviation beyond platitudes representing his own political values from his ivory tower.

The world’s economies lurch from one crisis to the next but rarely are the crises foreseen. The only constant that can be observed is that growth – when it happens – leads to the improvement of the human condition but no “economic theory” has been able to deliver sustained growth. Growth – when it happens – achieves more for poverty alleviation than any social welfare program. Real wealth creation achieves more in achieving full employment or achieving social equality than merely redistributing a static pot of wealth.

As Mark Buchanan writes:

There’s a real danger in seeing economics as an objective science from which all values have been stripped.

It may be that “economics” will always be subject to the vagaries of human attitudes and behaviour and – since these are never constant or rational – that economics theory applied to political reality can never be more than a very short-term action plan.

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Posted in Behaviour, Economics | 1 Comment »

Economics Nobel goes to Sargent and Simms as one financial crisis is followed by the next

October 10, 2011

This year’s Economics Nobel has been awarded to Thomas J. Sargent,  William R. Berkley Professor of Economics and Business, New York University and Christopher A. Sims, Harold B. Helms Professor of Economics and Banking at Princeton University, “for their empirical research on cause and effect in the macroeconomy”.

Press Release:

Considering the financial troughs and valleys of the last decade one would be justified in thinking economics to be a “black art” rather than a science. Economists blame greedy bankers and profligate and irresponsible governments (read politicians) while the bankers and speculators blame the inaccurate and arrogant economists and their flawed models. Alan Greenspan was a darling of the right and is now seen as being one of the key individuals responsible for the sub-prime fiasco. Paul Krugman, a noted critic of George Bush, won the Nobel prize in 2008 for his work (or perhaps his obsession) with international trade. Yet his solutions for the sub-prime crisis seem simplistic, have been heavily criticised and don’t seem to work.

There is a school of thought that Economics should never have been elevated to the status of the Nobel prize.  It is not one of the Nobel Prizes established by the will of Alfred Nobel in 1895, but is commonly identified with them. Officially it is the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel and was first awarded in 1969.

In his speech at the 1974 Nobel Banquet Friedrich Hayek stated that if he had been consulted whether to establish a Nobel Prize in economics he would

“have decidedly advised against it” ….  primarily because “the Nobel Prize confers on an individual an authority which in economics no man ought to possess. .. This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence. But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally.”

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Posted in Economics, Nobel Prize, Sweden | 1 Comment »

NonScience — not even Pseudo-Science

July 31, 2010

No doubt it is the quest for funding for what are “fashionable” projects which leads to this kind of rubbish. This is not even worthy of being called pseudo science – this is just nonscience (pun intended).

We find that an increase in a state’s unemployment rate decreases Google searches for “global warming” and increases searches for “unemployment,” and that the effect differs according to a state’s political ideology.

This is is what passes for science for University of California economists Matthew Kahn and Matthew Kotchen in their peer-reviewed paper (abstract here) “Environmental Concern and the Business Cycle: The Chilling Effect of Recession”.

Apparently this is funded by the National Bureau of Economic Research. Clearly they have surplus funds to disseminate, or was it the trigger words “Environmental Concern” which loosened the purse strings.

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Does it really take two University economists to come to the conclusion that

Finally, in California, we find that an increase in a county’s unemployment rate is associated with a significant decrease in county residents choosing the environment as the most important policy issue.

One wonders who the peers who reviewed this article and recommended publication could be — and are they getting any funding from the NBER?

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Posted in Environment, Non-Science, Science | 1 Comment »

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