Home > Uncategorized > Christian Odendahl and Ferdinando Giugliano: Fail.

Christian Odendahl and Ferdinando Giugliano: Fail.

Oké. I’m a teacher. So, I’m primed and educated to be an arrogant nitpicker. But let’s make the best of a this dire situation and trash the work of Ferdinando Giugliano and Christian Odendahl who defile the language of scientific economics. Which is not just a mistake but a dangerous act which might cause misunderstandings and destructive economic policies. On the website of the Centre for European Reform they state about Italy: “But Italy mostly has itself to blame. The abysmal productivity growth over two decades is also down to successive governments’ failure to invest in infrastructure, research, education and skills; to make its public institutions and judicial system more efficient in order to help the most successful and productive businesses grow; to raise the employment rate of both men and women; and to promote the deployment of labour and capital to productive companies”. I agree (though not entirely, the investment rate in Italy is not that low and, as in other European countries, the average level of education is higher than ever while. And when good companies can not attract good workers they should fire the managers). But they also state: Italy should: ‘switch expenditure from public consumption, such as the pension system, towards public investment’.

Sigh. State financed pensions are not ‘government consumption’ but ‘transfer incomes’. ‘Government consumption’ is the kind of spending on education and the judicial system which Odendahl and Giugliano want to increase. As the Odendahl and Giugliano article will be read an all kind of civil servants will look at the statistics and advice the politicians to get ‘government consumption’ down, without realizing what ‘government consumption’ actually is, this might have dire consequences. This may sound far-fetched, but neoclassical macro-models make this grave mistake, too. And see this article about the demise of the Greek health system. One of the hallmarks of a proper science is a systematic use of words and definitions. Neoclassical macro does not pass this test. Which is a bad thing – and not just for science.

  1. patrick newman
    December 20, 2016 at 2:39 pm

    Tell me about it! In the UK we have had years of Micawber (Dickens character) moneynomics which essentially treats the government account like a household account. It is really a presentation of the Right wing objective to decrease and minimise the proportion of state spending (goods and service as well as transfer payments). Many are deceived by the superficial and plausible rhetoric!

  2. December 21, 2016 at 7:50 am

    State financed pensions are not ‘government consumption’ but ‘transfer incomes’.

    Of course I couldn’t agree more about the general point, but “transfer”‘s overuse is unfortunate. It is not a good word for pensions and some other “transfers” either. “Deferred compensation” or sometimes even “forced saving” is better. This makes it clearer that “switching away” from them is better called “theft” or “fraud.”

  3. December 22, 2016 at 9:40 am

    I’ve never understood the use of the term “public consumption” applied to such things as pensions and universal health care. Aren’t these more properly categorized as “public investment?” After all, these support and improve a well functioning and healthy (physically and fiscally) society. And this in turn helps businesses and their patrons. Maybe these economic arguments are not the main or even only reasons such investment is discouraged by economists and business lobbies. Perhaps the opposition is based more in concerns to control and diminish the political power and organizational influence of opponents of capitalism and laissez faire economics. Science is always concerned with values, else how could any scientist choose areas of concern to study or methods of study? But science should not be used as a means to promote one set of values over another, absent solid and consistent empirical evidence to that effect. Something sorely lacking in economics.

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