Ideas@TheCentre – The CIS newsletter (Sydney), 20 August 2010

Don’t get me wrong: I love receiving letters. However, there was something funny about the open letter of 51 hitherto obscure economists in support of the government’s economic policy. My own impression had been that there was hardly any economist in the country who still believed in the old Keynesian model. But then again, it is easy to overlook 51 economists among the thousands in a big country like Australia.

Maybe the incident was funny only because it reminded me of an old joke. There are two basic laws of economics. The first law: For every economist, there exists an equal and opposite economist. And the second law: They’re both wrong.

That economists are notoriously unable to agree with each other is not a great secret. It was Winston Churchill who once quipped that if you put two economists into a room you would get two different opinions. Unless one of them was Lord Keynes, in which case you would get three.

This was also true of the letter written by our 51 most distinguished economists, one of whom is University of Western Sydney Professor Steve Keen. Keen has gained a reputation as Australia’s resident doom-monger and even makes me look like an optimist.

During the financial crisis, Keen repeatedly scolded the government for extending the first-time home buyers’ grant. Now he is praising the government for doing just that. Perhaps Steve Keen should be writing letters to himself to clarify his own position before signing another open letter.

There is strange kind of idea behind this whole open letter writing business: the more people sign it, the more correct it must be. By that logic, having only 51 economists must be only half as good as 102 economists could have been.

And then, of course, if you only go by the numbers it does not matter whether the initiator of the open letter is best known as the author of a textbook on Marxist economics. Although you may wonder what an intricate knowledge of Marx’s exploitation theory can teach us about pink batts and overpriced school halls.

Maybe we should not be too critical of economists writing open letters. At least they have kept a few journalists busy writing newspaper columns about economists writing letters. And then I can write a piece for Ideas@TheCentre about that.

Talk about a multiplier effect! Now that’s what I call a good stimulus program.